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Strategic M
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G
lobalization, Innovation and Sustainability
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Strategic Management
and Business Policy
Globalization, Innovation and Sustainability
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FIFTEENTH EDITION
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Alan N. Hoffman
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Strategic
Management
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Policy
GLOBALIZATION, INNOVATION,
AND SUSTAINABILITY
Thomas L. Wheelen
Formerly with University of
Virginia, Trinity College, Dublin,
Ireland
Charles E. Bamford
University of Notre Dame
J. David Hunger
Formerly with Iowa State University,
St. John’s University
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Dedicated to
TOM WHEELEN AND DAVID HUNGER
Tom originated this book in the late 1970s and with his friend
David Hunger brought the first
edition to fruition in 1982. What a ride it was! We lost both of
these extraordinary men in rapid
succession. After battling bone cancer, Tom died in Saint
Petersburg, Florida, on December 24,
2011. David died in St. Joseph, Minnesota on April 10, 2014
after fighting cancer himself. It was
Tom’s idea from the very beginning to include the latest
research and useful material written in
such a way that the typical student could read and understand
the book without outside assistance.
That has been a key reason for the success of the book through
its many editions. Tom and David
worked in adjoining offices at the McIntire School of
Commerce at the University of Virginia
where their lifelong collaboration blossomed. Tom’s last months
were spent working with the two
new co-authors to map out the direction for the 14th edition and
we were fortunate to work with
David through the early part of the 14th edition update until his
fight against his cancer took prior-
ity. We thank you both and bid you a fond farewell! This 15th
edition is for you!
Alan N. Hoffman
Charles E. Bamford
SPECIAL DEDICATION TO DAVID HUNGER
A special dedication in honor of David Hunger to his
colleagues, friends, and students—
It is our hope and prayer that you found, and continue to find,
some joy in your study of Strategic
Management and Business Policy and, perhaps, experience a
sense of the passion behind the
subject matter presented in this textbook. It was originated by
two men who were the best of
friends and colleagues, Dr. Tom Wheelen (May 30, 1935 –
December 24, 2011) and our Dad,
Dr. J. David Hunger (May 17, 1941 – April 10, 2014). This will
be the first edition we will see
without a handwritten note in the front and a dedication to us
all. Dad came alive discussing
strategy, case management, theory, entrepreneurship, and the
daily happenings in the field of
management. Even relaxing at the end of the day, he could be
found thumbing through a Business
Week or journal. Colleagues always knew when he was in their
presentations because he was fully
engaged, offering questions and happy to share in an animated
dialogue. Students speak fondly
of being in his class. His dedication to the field never ended.
Even up to a month before he died
(still undergoing chemotherapy) he insisted on travelling by
train from Minnesota to Chicago for a
Case Research Conference to run a panel. We are so proud and
thankful that Drs. Alan Hoffman
and Chuck Bamford knew Tom and Dad and are carrying the
torch forward. As his 4 daughters
A01_WHEE5488_15_GE_FM.indd 3 7/13/17 4:01 PM
4 DEDICATED
and 6 grandchildren, we miss him daily. We lost him far too
soon. Finally, our mom, Betty
Hunger, who lived with the authorship of this textbook for
three quarters of their 45 years together
and joked that it was their 5th child, wishes to express just how
much she misses Dad and looks
forward to seeing him again.
Betty, Kari and Jeff, Madison and Megan, Suzi and Nick,
Summer and Kacey,
Lori and Derek, Merry and Dylan, and Edan and Greyson.
We love you David/Dad/GrandDad.
To Will Hoffman, the greatest son in the world…. and to our
saint Wendy Appel.
…. and to Jodi L. Silton, thank you for your kindness and
understanding.
Alan Hoffman
To Yvonne, for your support, advice, encouragement, love, and
confidence. To my children Ada,
Rob, and Sean and my grandchildren Silas, Isaac, and Clara.
Chuck Bamford
A01_WHEE5488_15_GE_FM.indd 4 7/13/17 4:01 PM
Brief Contents
PART ONE Introduction to Strategic Management and Business
Policy 33
C H A P T E R 1 Basic Concepts of Strategic Management 34
C H A P T E R 2 Corporate Governance 72
C H A P T E R 3 Social Responsibility and Ethics in Strategic
Management 102
PART TWO Scanning the Environment 123
C H A P T E R 4 Environmental Scanning and Industry
Analysis 124
C H A P T E R 5 Organizational Analysis and Competitive
Advantage 164
PART THREE Strategy Formulation 199
C H A P T E R 6 Strategy Formulation: Business Strategy
200
C H A P T E R 7 Strategy Formulation: Corporate Strategy
224
C H A P T E R 8 Strategy Formulation: Functional Strategy
and Strategic Choice 250
PART FOUR Strategy Implementation and Control 279
C H A P T E R 9 Strategy Implementation: Global Strategy
280
C H A P T E R 1 0 Strategy Implementation: Organizing and
Structure 294
C H A P T E R 1 1 Strategy Implementation: Staffing and
Directing 324
C H A P T E R 1 2 Evaluation and Control 348
PART FIVE Introduction to Case Analysis 377
C H A P T E R 1 3 Suggestions for Case Analysis 378
PART SIx Cases in Strategic Management 1-1
GLOSSARY G-1
NAME INDEx I-1
SUBJECT INDEx I-6
5
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Contents
Preface 21
About the Authors 29
PART ONE Introduction to Strategic Management and Business
Policy 33
C H A P T E R 1 Basic Concepts of Strategic Management 34
The Study of Strategic Management 37
Phases of Strategic Management 37
Benefits of Strategic Management 38
Globalization, Innovation, and Sustainability: Challenges to
Strategic
Management 39
Impact of Globalization 40
Impact of Innovation 41
Global Issue: ASEAN: REGIONAL TRADE ASSOCIATIONS
42
Impact of Sustainability 42
Theories of Organizational Adaptation 44
Creating a Learning Organization 44
Basic Model of Strategic Management 46
Environmental Scanning 46
Strategy Formulation 48
Strategy Implementation 52
Evaluation and Control 53
Feedback/Learning Process 54
Initiation of Strategy: Triggering Events 54
Strategic Decision Making 55
What Makes a Decision Strategic? 55
Mintzberg’s Modes of Strategic Decision Making 56
Strategic Decision-Making Process: Aid to Better Decisions 57
The Strategic Audit: Aid to Strategic Decision Making 58
End of Chapter Summary 59
APPENDIx 1.A Strategic Audit of a Corporation 64
6
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C H A P T E R 2 Corporate Governance 72
Role of the Board of Directors 75
Responsibilities of the Board 76
Board of Directors Composition 79
Innovation Issue: JCPENNEY AND INNOVATION 80
Strategy Highlight: AGENCY THEORY VERSUS
STEWARDSHIP THEORY
IN CORPORATE GOVERNANCE 81
Nomination and Election of Board Members 85
Organization of the Board 86
Impact of Sarbanes–Oxley on U.S. Corporate Governance 87
Global Issue: GLOBAL BUSINESS BOARD ACTIVISM AT
YAHOO! 88
Improving Governance 89
Evaluating Governance 89
Avoiding Governance Improvements 90
Trends in Corporate Governance 90
The Role of Top Management 91
Responsibilities of Top Management 92
Sustainability Issue: CEO PAY AND CORPORATE
PERFORMANCE 92
End of Chapter Summary 95
C H A P T E R 3 Social Responsibility and Ethics in Strategic
Management 102
Social Responsibilities of Strategic Decision Makers 104
Responsibilities of a Business Firm 104
Sustainability 107
Sustainability Issue: MARkS & SPENCER LEADS THE WAY
108
Corporate Stakeholders 108
Stakeholder Analysis 109
Strategy Highlight: JOHNSON & JOHNSON CREDO 111
Ethical Decision Making 111
Some Reasons for Unethical Behavior 112
Global Issue: HOW RULE-BASED AND RELATIONSHIP-
BASED GOVERNANCE
SYSTEMS AFFECT ETHICAL BEHAVIOR 113
Innovation Issue: TURNING A NEED INTO A BUSINESS TO
SOLVE THE NEED 115
Encouraging Ethical Behavior 116
Views on Ethical Behavior 117
End of Chapter Summary 119
CONTENTS 7
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PART TWO Scanning the Environment 123
C H A P T E R 4 Environmental Scanning and Industry
Analysis 124
Aspects of Environmental Scanning 126
Identifying External Environmental Variables 127
Sustainability Issue: GREEN SUPERCARS 128
Strategic Importance of the External Environment 129
Scanning the Societal Environment: Steep Analysis 129
Global Issue: SUVS POWER ON IN CHINA 137
Identifying External Strategic Factors 139
Industry Analysis: Analyzing the Task Environment 139
Porter’s Approach to Industry Analysis 140
Industry Evolution 144
Categorizing International Industries 144
Innovation Issue: TAkING STOCk OF AN OBSESSION 145
International Risk Assessment 146
Strategic Groups 146
Strategic Types 147
Hypercompetition 148
Using Key Success Factors to Create an Industry Matrix 149
Competitive Intelligence 150
Sources of Competitive Intelligence 151
Strategy Highlight EVALUATING COMPETITIVE
INTELLIGENCE 152
Monitoring Competitors for Strategic Planning 153
Forecasting 154
Danger of Assumptions 154
Useful Forecasting Techniques 154
The Strategic Audit: A Checklist for Environmental Scanning
156
Synthesis of External Factors 156
End of Chapter Summary 158
C H A P T E R 5 Organizational Analysis and Competitive
Advantage 164
A Resource-Based Approach to Organizational Analysis—Vrio
166
Core and Distinctive Competencies 166
Using Resources/Capabilities to Gain Competitive Advantage
169
8 CONTENTS
A01_WHEE5488_15_GE_FM.indd 8 7/13/17 4:01 PM
Business Models 170
Value-Chain Analysis 172
Industry Value-Chain Analysis 172
Corporate Value-Chain Analysis 174
Scanning Functional Resources and Capabilities 175
Basic Organizational Structures 175
Culture 177
Global Issue: MANAGING CORPORATE CULTURE FOR
GLOBAL COMPETITIVE
ADVANTAGE: ABB VS. PANASONIC 179
Strategic Marketing Issues 179
Innovation Issue: DOCOMO MOVES AGAINST THE GRAIN
181
Strategic Financial Issues 182
Strategic Research and Development (R&D) Issues 183
Strategic Operations Issues 185
Strategic Human Resource Management (HRM) Issues 187
Strategic Information Systems/Technology Issues 189
Sustainability Issue: THE OLYMPIC GAMES—LONDON
2012/SOCHI 2014/RIO 2016 &
TOkYO 2020 190
The Strategic Audit: A Checklist for Organizational Analysis
192
Synthesis of Internal Factors (IFAS) 192
End of Chapter Summary 194
PART THREE Strategy Formulation 199
C H A P T E R 6 Strategy Formulation: Business Strategy 200
A Framework for Examining Business Strategy 202
Generating a Strategic Factors Analysis Summary (SFAS)
Matrix 203
Finding Market Niches 205
Mission and Objectives 206
Business Strategies 207
Porter’s Competitive Strategies 207
Global Issue: HAS EMIRATES REACHED THE LIMIT OF
GLOBALIZATION? 209
Innovation Issue: CHEGG AND COLLEGE TExTBOOkS 212
Sustainability Issue: STRATEGIC SUSTAINABILITY—ESPN
214
Cooperative Strategies 215
Strategic Alliances 216
End of Chapter Summary 220
CONTENTS 9
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C H A P T E R 7 Strategy Formulation: Corporate Strategy 224
Corporate Strategy 226
Directional Strategy 226
Growth Strategies 227
Strategy Highlight: TRANSACTION COST ECONOMICS
ANALYZES VERTICAL
Growth StrateGy 230
Global Issue: GLOBAL ExPANSION IS NOT ALWAYS A
PATH TO GROWTH 232
Controversies in Directional Growth Strategies 233
Stability Strategies 234
Retrenchment Strategies 235
Portfolio Analysis 237
BCG Growth-Share Matrix 238
Sustainability Issue: GENERAL MOTORS AND THE
ELECTRIC CAR 240
Advantages and Limitations of Portfolio Analysis 241
Managing a Strategic Alliance Portfolio 241
Corporate Parenting 242
Innovation Issue: TO RED HAT OR NOT? 243
Developing a Corporate Parenting Strategy 244
Horizontal Strategy and Multipoint Competition 244
End of Chapter Summary 245
C H A P T E R 8 Strategy Formulation: Functional Strategy
and Strategic Choice 250
Functional Strategy 252
Marketing Strategy 252
Financial Strategy 254
Research and Development (R&D) Strategy 255
Operations Strategy 256
Global Issue: WHY IS STARBUCkS AFRAID OF ITALY? 257
Purchasing Strategy 258
Sustainability Issue: HOW HOT IS HOT? 259
Innovation Issue: WHEN AN INNOVATION FAILS TO LIVE
UP TO ExPECTATIONS 260
Logistics Strategy 261
Human Resource Management (HRM) Strategy 261
Information Technology Strategy 262
10 CONTENTS
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The Sourcing Decision: Location of Functions 262
Strategies To Avoid 265
Strategic Choice: Constructing Scenarios 265
Constructing Corporate Scenarios 266
The Process of Strategic Choice 271
Using Policies to Guide Strategic Choices 273
End of Chapter Summary 273
PART FOUR Strategy Implementation and Control 279
C H A P T E R 9 Strategy Implementation: Global Strategy
280
International Entry 282
International Coordination 284
International Strategic Alliances 285
Stages of International Development 285
International Employment 286
Measurement of Performance 288
End of Chapter Summary 290
C H A P T E R 1 0 Strategy Implementation: Organizing and
Structure 294
Strategy Implementation 296
Who Implements Strategy? 297
What Must Be Done? 297
Developing Programs, Budgets, and Procedures 297
Sustainability Issue: A BETTER BOTTLE—ECOLOGIC
BRANDS 298
Achieving Synergy 302
How Is Strategy To Be Implemented? Organizing for Action 303
Structure Follows Strategy 303
Stages of Corporate Development 304
Innovation Issue: THE P&G INNOVATION MACHINE
STUMBLES 305
Organizational Life Cycle 309
Flexible Types of Organizational Structure 310
The Matrix Structure 310
Network Structure—The Virtual Organization 312
Global Issue: OUTSOURCING COMES FULL CIRCLE 313
Cellular/Modular Organization: A New Type of Structure? 314
CONTENTS 11
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Reengineering and Strategy Implementation 314
Six Sigma 315
Designing Jobs to Implement Strategy 316
Centralization Versus Decentralization 317
End of Chapter Summary 318
C H A P T E R 1 1 Strategy Implementation: Staffing and
Directing 324
Staffing 326
Staffing Follows Strategy 327
Selection and Management Development 329
Innovation Issue: HOW TO kEEP APPLE “COOL” 329
Problems in Retrenchment 331
Leading 333
Managing Corporate Culture 333
Sustainability Issue: PANERA AND THE “PANERA CARES
COMMUNITY CAFé” 334
Action Planning 338
Management by Objectives 340
Total Quality Management 341
Global Issue: CULTURAL DIFFERENCES CREATE
IMPLEMENTATION PROBLEMS
in MerGer 342
End of Chapter Summary 342
C H A P T E R 1 2 Evaluation and Control 348
Measuring Performance 350
Appropriate Measures 350
Types of Controls 351
Innovation Issue: SOLAR POWER AND THE GRID 352
Activity-Based Costing 353
Enterprise Risk Management 354
Primary Measures of Corporate Performance 354
Sustainability Issue: THE END OF THE CASH REGISTER
RECEIPT 357
Balanced Scorecard Approach: Using Key Performance
Measures 358
Primary Measures of Divisional and Functional Performance
360
Responsibility Centers 360
Using Benchmarking To Evaluate Performance 362
12 CONTENTS
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Global Issue: Counterfeit Goods And PirAted softwAre: A
GlobAl
Problem 363
Strategic Information Systems 363
Enterprise Resource Planning 364
Radio Frequency Identification and Near Field Communication
364
Divisional and Functional is Support 365
Problems in Measuring Performance 365
Short-Term Orientation 366
Goal Displacement 367
Guidelines for Proper Control 368
Aligning Incentives 369
End of Chapter Summary 371
PArt fiVe Introduction to Case Analysis 377
C h A P t e r 1 3 Suggestions for Case Analysis 378
The Case Method 380
Researching the Case Situation 380
Financial Analysis: A Place to Begin 381
Analyzing Financial Statements 381
Common-Size Statements 385
Z-Value and the Index of Sustainable Growth 385
Useful Economic Measures 386
Format for Case Analysis: The Strategic Audit 386
End of Chapter Summary 389
APPendix 13.A Resources for Case Research 391
APPendix 13.b Suggested Case Analysis Methodology Using the
Strategic Audit 393
APPendix 13.C Example of Student-Written Strategic Audit 396
PArt six Cases in Strategic Management 1-1
s e C t i o n A Executive Leadership
CAse 1 The Recalcitrant Director at Byte Products, Inc.:
Corporate Legality versus
Corporate Responsibility 1-7
(Contributors: Dan R. Dalton, Richard A. Cosier, and Cathy A.
Enz)
A plant location decision forces a confrontation between the
board of directors and the CEO
regarding an issue in social responsibility and ethics.
Contents 13
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CASE 2 The Wallace Group 2-1
(Contributor: Laurence J. Stybel)
Managers question the company’s strategic direction and how it
is being managed by its founder and
CEO. Company growth has resulted not only in disorganization
and confusion among employees,
but in poor overall performance. How should the board deal
with the company’s founder?
S E C T I O N B Business Ethics
CASE 3 Everyone Does It 3-1
(Contributors: Steven M. Cox and Shawana P. Johnson)
When Jim Willis, Marketing VP, learns that the launch date for
the company’s new satellite will be
late by at least a year, he is told by the company’s president to
continue using the earlier published
date for the launch. When Jim protests that the use of an
incorrect date to market contracts is
unethical, he is told that spacecraft are never launched on time
and that it is common industry
practice to list unrealistic launch dates. If a realistic date was
used, no one would contract with the
company.
CASE 4 The Audit 4-1
(Contributors: Gamewell D. Gantt, George A. Johnson, and John
A. Kilpatrick)
A questionable accounting practice by the company being
audited puts a new CPA in a difficult
position. Although the practice is clearly wrong, she is being
pressured by her manager to ignore it
because it is common in the industry.
S E C T I O N C Corporate Governance and Social
Responsibility
CASE 5 Early Warning or False Sense of Security?
Concussion Risk and the Case of
the Impact-Sensing Football Chinstrap 5-1
(Contributors: Clifton D. Petty, and Michael R. Shirley)
In 2009, Battle Sports Science, headquartered in Omaha,
Nebraska, was built with a focus on
“enhancing safety for athletes.” Specifically, the company
wanted to protect young athletes who
might have suffered a concussion. Battle Sports Science
attempted to gain market attention for
its US$149.99 impact indicator (chin strap) through
endorsements, and had enlisted a number
of NFL players. The company hoped to sell the device to sports
programs (schools) as well as to
individual players.
CASE 6 The Storm of Governance Reform at the American Red
Cross 6-1
(Contributors: Jill A. Brown and Anne Anderson)
In early 2006, a U.S. Senate Finance Committee began
investigating the American Red Cross
following substantial concerns over the governance
effectiveness of the organization and its
Board of Governors. This investigation was prompted by
concerns over Hurricane Katrina
relief efforts, as well as governance concerns regarding the
structure and processes of the ARC
Board. Consequently, the Finance Committee appointed an
Independent Governance Advisory
Panel to provide recommendations regarding how to overhaul
the American Red Cross Board of
Governors.
CASE 7 Chipotle Mexican Grill, Inc.: Conscious Capitalism by
Serving “Food With
Integrity” 7-1
(Contributor: Alan N. Hoffman)
People loved Chipotle Mexican Grill because of the tasty and
healthy food as well as its
edgy, trendy, cool brand image. Chipotle established itself as a
successful company practicing
“conscious capitalism” by serving “food with integrity”—its
supply chain and corporate culture
were closely integrated from the time that ingredients were
farmed, raised, harvested, and shipped
to stores to the time the final product was placed on a
customer’s serving tray. By 2014, the fast
new
new
14 CONTENTS
A01_WHEE5488_15_GE_FM.indd 14 7/13/17 4:01 PM
casual food market in the US became increasingly competitive
and crowded with many new
entrants. Being a public listed company, Chipotle had to meet
Wall Street’s high expectations of
growth and earnings. Living up to analysts’ expectations was
becoming increasingly difficult for
Chiptole.
S E C T I O N D Privacy
CASE 8 Google and the Right to Be Forgotten 8-1
(Contributor: Cynthia E. Clark)
In 2009, Mario Costeja Gonzalez, a self-employed attorney
casually “googled” himself and was
startled by what came up on his computer screen. Prominently
displayed in the search results
was a brief legal notice that had appeared more than a decade
earlier in a local newspaper, which
listed property seized and being auctioned by a government
agency for nonpayments of debts.
Costeja immediately realized that this information could
damage his reputation as an attorney and
decided to fight Google to request deletion of that data.
S E C T I O N E International Issues in Strategic Management
CASE 9 Harley Davidson: An Overreliance on Aging Baby
Boomers 9-1
(Contributors: Alan N. Hoffman and Natalia Gold)
At Harley Davidson, customers not only purchased a
motorcycle, they bought the “rebel” lifestyle
Harley signified. This rebel image took a long time to develop
and constituted a major competitive
advantage for Harley. Nothing promised the same excitement as
being on the open road on a
Harley, its engine roaring, the wind whipping, the great open
spaces of America just down the
road. Harley Davidson specifically targeted a narrowly defined
market of middle-aged males with
disposable income. However, as US baby boomers got older, the
company recognized that it had
to look to new markets and demographics to expand sales.
CASE 10 Uber: Feeling the Heat from Competitors and
Regulators Worldwide 10-1
(Contributors: Alan N. Hoffman and Natalia Gold)
Uber, originally known as “UberCab,” was started by Travis
Kalanick and Garrett Camp in
San Francisco, California, in 2009. The company grew rapidly
and by 2015 it was providing
carpooling services in 300 major cities in 58 countries around
the world. As Uber moved forward
into new territories, however, it got entangled in many
regulatory and legal hassles. The company
had to figure out how to sustain its lead in the heavily
regulated, controversial, competitive, and
ever-changing taxi industry. Moreover, despite a landslide
market share Uber was operating
at a loss. How to lower costs and become profitable was another
challenge for this young and
aggressive company.
S E C T I O N F General Issues in Strategic Management
I N D U S T R Y O N E : INTERNET COMPANIES
CASE 11 Pandora Internet Radio (2014): Just Press Play 11-1
(Contributors: Gary Stenftennagel and Joyce Vincelette)
Pandora Media was built around the idea of providing listeners
with only the music that they
love. To do so, Pandora fundamentally changed how people
listened to music by allowing station
customization and the ability to listen to music over the
Internet. As technology changed, Pandora
evolved from a Web site based radio provider and developed a
mobile application where the
company could offer its services to customers whenever and
wherever they wanted to listen to
music. Monetizing the mobile product proved to be difficult and
Pandora had not yet attained
profitability.
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CASE 1 2 Amazon.com, Inc.: Retailing Giant to High-Tech
Player? 12-1
(Contributor: Alan N. Hoffman)
In 2012, more than half of all Amazon sales came from
computers, mobile devices including the
Kindle, Kindle Fire, and Kindle Touch, and other electronics, as
well as general merchandise
from home and garden supplies to groceries, apparel, jewelry,
health and beauty products,
sports and outdoor equipment, tools, and auto and industrial
supplies. Amazon was at a
crossroads with regard to its push into technology versus its
general merchandise. Amazon also
faced other challenges, including those from state governments
that wanted it to collect sales
taxes so it would not adversely compete against local
businesses.
CASE 1 3 Blue Nile, Inc.: “Stuck in the Middle” of the
Diamond Engagement Ring
Market 13-1
(Contributor: Alan N. Hoffman)
Blue Nile Inc. has developed into the largest online retailer of
diamond engagement rings. Unlike
traditional jewelry retailers, Blue Nile operates completely
store-front-free, without in-person
consultation services. The business conducts all sales online or
by phone, and sales include both
engagement (70%) and non-engagement (30%) categories. Blue
Nile’s vision is to educate its
customer base so customers can make an informed, confident
decision no matter what event they
are celebrating. It wants to make the entire diamond-buying
process easy and hassle-free.
I N D U S T R Y T W O : ENTERTAINMENT AND LEISURE
CASE 1 4 Groupon Inc.: Daily Deal or Lasting Success? 14-1
(Contributors: Nick Falcone, Eric Halbruner, Ellie A. Fogarty,
and Joyce Vincelette)
Groupon began as a local Chicago discount service and became
a global phenomenon seemingly
overnight. It was a great idea. The company was the first of its
kind and changed the way
consumers spend, shop, and think about discounts. But how
could Groupon, based on such
innovation and having experienced such exceptional growth, be
in such a precarious position?
A wave of competition had swelled, including the likes of
technology giants and both general
and niche daily deals services, all replicating Groupon’s
business model. How could Groupon
compete against large companies and their expansive resources?
CASE 1 5 Netflix Inc.: The 2011 Rebranding/Price Increase
Debacle 15-1
(Contributor: Alan N. Hoffman)
On September 18, 2011, Netflix CEO and co-founder Reed
Hastings announced on the Netflix
blog that the company was splitting its DVD delivery service
from its online streaming service,
rebranding its DVD delivery service, Qwikster, as a way to
differentiate it from its online
streaming service, and creating a new Web site for it. Three
weeks later, in response to customer
outrage and confusion, Hastings rescinded the decision to
rebrand the DVD delivery service,
Qwikster, and reintegrated it into Netflix. Nevertheless, only
five weeks after the initial split,
Netflix acknowledged that it had lost 800,000 U.S. subscribers
and expected to lose many more,
thanks both to the Qwikster debacle and the price hike the
company had decided was necessary
to cover increasing content costs.
CASE 1 6 Town Sports International Holdings, Inc.:
Unsquashable 16-1
(Contributors: Sarah Stefanelli, Christina Marie Kopka, Jakub
Libucha, and Joyce
Vincelette)
Town Sports International decided to move forward with its
expansion strategy in order to
become the most recognized health club network, through both
designing and building clubs
and through selective acquisitions within its four major markets,
Boston, New York, Washington
D.C., and Philadelphia. Town Sports Int’l set out to accomplish
this efficiently and effectively by
living by its customer-centric mission, “Improving Lives
Through Exercise.”
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CASE 1 7 Zynga, Inc. (2011): Whose Turn Is It? 17-1
(Contributors: Zachary Burkhalter, Daniel Zuller, Concetta
Bagnato, Joyce Vincelette,
and Ellie A. Fogarty)
Zynga built its company around social gaming. This new type of
gaming transformed the
gaming industry on multiple levels and across various
platforms. Zynga originally built its games
using the Facebook platform and then capitalized on the
company’s unique method of social
networking to capture audiences around the world. However,
this strong reliance on Facebook
and changes in consumer gaming practices caused some concern
among outside investors as to
the future of Zynga.
INDUSTRY THREE: FOOD AND BEVERAGE
CASE 1 8 The Boston Beer Company: Brewers of Samuel
Adams Boston Lager (Mini
Case) 18-1
(Contributor: Alan N. Hoffman)
The Boston Beer Company, founded in 1984 by Jim Koch, is
viewed as a pioneer in the American
craft beer revolution. Brewing over one million barrels of 25
different styles of beer, Boston Beer
is the sixth-largest brewer in the United States. Even though
overall domestic beer sales declined
1.2% in 2010, sales of craft beer have increased 20% since
2002, with Boston Beer’s increasing
22% from 2007 to 2009. How can the company continue its
rapid growth in a mature industry?
CASE 1 9 Panera Bread Company (2010): Still Rising
Fortunes? 19-1
(Contributors: Joyce P. Vincelette and Ellie A. Fogarty)
Panera Bread is a successful bakery-café known for its quality
soups and sandwiches. Even
though Panera’s revenues and net earnings have been rising
rapidly, new unit expansion
throughout North America has fueled this growth. Will revenue
growth stop once expansion
slows? The retirement of CEO Ronald Shaich, the master baker
who created the “starter” for the
company’s phenomenal growth, is an opportunity to rethink
Panera’s growth strategy.
CASE 2 0 Whole Foods Market (2010): How to Grow in an
Increasingly Competitive
Market? (Mini Case) 20-1
(Contributors: Patricia Harasta and Alan N. Hoffman)
Whole Foods Market is the world’s leading retailer of natural
and organic foods. The company
differentiates itself from competitors by focusing on innovation,
quality, and service excellence,
allowing it to charge premium prices. Although the company
dominates the natural/organic
foods category in North America, it is facing increasing
competition from larger food retailers
like Wal-Mart, who are adding natural/organic foods to their
offerings.
CASE 2 1 Burger King (Mini Case) 21-1
(Contributor: J. David Hunger)
Founded in Florida in 1953, Burger King has always trailed
behind McDonald’s as the second-
largest fast-food hamburger chain in the world. Although its
total revenues dropped only slightly
from 2009, its 2010 profits dropped significantly, due to high
expenses. Burger King’s purchase
by an investment group in 2010 was an opportunity to rethink
the firm’s strategy.
CASE 2 2 Sonic Restaurants: Does Its Drive-In Business
Model Limit Future Growth
Potential? 22-1
(Contributors: Alan N. Hoffman and Natalia Gold)
Sonic is an iconic American drive-in fast-food chain with nearly
thousands of franchises
established across the United States by 2014. As Sonic
continued to expand, it ran into various
hurdles. The most daunting challenge was to enter urban
environments where space was too
scarce to make drive-in possible. At the same time, while the
drive-in model was highly effective
in the US, thanks to nostalgia, it did not have the same
emotional appeal to international
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consumers. Should Sonic move away from the drive-in model
and reinvent itself? If so, would it
become just another fast food burger joint with a customizable
menu? And how could it compete
with larger players such as McDonald’s and Burger King that
already had a substantial urban
and international presence?
CASE 2 3 “Breaking Up is Hard to Do”: PepsiCo in 2014 23-1
(Contributor: Ram Subramanian)
On April 17, 2014, Indra Nooyi, the Chief Executive Officer of
the Purchase, New York-based
PepsiCo, a diversified beverage and snack foods company, met
with Ian Cook, the Presiding
Director of the company’s Board, to discuss a response to
Nelson Peltz’s (the head of Trian Fund
Management, an activist fund) latest call for breaking up the
company into two independent
entities. Peltz had threatened to approach the company’s
stockholders directly if the Board did
not accede to his demands.
INDUSTRY FOUR: APPAREL
CASE 2 4 Under Armour 24-1
(Contributors: Ram Subramanian and Pradeep Gopalakrishna)
Under Armour’s footwear sales declined by 4.5% during the
second quarter of 2009 and
showed a 16.6% decline in the first six months of 2010
compared to 2009. This was in contrast
to its performance apparel, the company’s core category, which
saw a 32.2% uptick over
2009. Under Armour had tremendous growth opportunities in
the apparel category in China.
However, CEO Kevin Plank wanted Under Armour to be a
leading player in the field of
athletic footwear.
CASE 2 5 TOMS Shoes (Mini Case) 25-1
(Contributor: J. David Hunger)
Founded in 2006 by Blake Mycoskie, TOMS Shoes is an
American footwear company based in
Santa Monica, California. Although TOMS Shoes is a for-profit
business, its mission is more
like that of a not-for-profit organization. The firm’s reason for
existence is to donate to children
in need one new pair of shoes for every pair of shoes sold. By
2010, the company had sold over
one million pairs of shoes. How should the company plan its
future growth?
CASE 2 6 J.C. Penney Company, Inc.: Surviving the Ron
Johnson (CEO) Era 26-1
(Contributor: Alan N. Hoffman)
Ron Johnson, the architect behind Apple’s wildly successful
retail stores and 15-year Target
veteran, became American department store chain J.C. Penney’s
new CEO in November 2011.
The owner of J.C. Penney had high hopes for Johnson, who
proceeded to make drastic changes
to the company including a new logo and a new spokesperson
(Ellen DeGeneres). His vision
included transforming 700 of the largest J.C. Penney stores into
collections of some 100 branded
shops with a central ”town square” gathering area for services.
J.C. Penney fired Ron Johnson
after just 17 months, following a disastrous decline in business
directly attributable to the failure
of the new business plan.
INDUSTRY FIVE: RETAILING
CASE 2 7 Best Buy Co. Inc. (2009): A Sustainable Customer-
Centricity Model? 27-1
(Contributor: Alan N. Hoffman)
Best Buy, the largest consumer electronics retailer in the United
States, operates 4000 stores
in North America, China, and Turkey. It distinguishes itself
from competitors by deploying a
differentiation strategy based on superior service rather than
low price. The recent recession has
stressed its finances and the quality of its customer service.
How can Best Buy continue to have
innovative products, top-notch employees, and superior
customer service while facing increased
competition, operational costs, and financial stress?
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CASE 2 8 Target Corp’s Tarnished Reputation: Failure in
Canada and a Massive Data
Breach 28-1
(Contributors: Alan N. Hoffman and Natalia Gold)
Target is a US mass-market discount store catering to shoppers
seeking high quality products. In
a crowded market, Target was eager to grow its business outside
the US and online. It expanded
to Canada in 2011 by acquiring a failed retailer. A move that
seemed prudent actually saddled
Target with inconveniently located stores and strained its
logistics infrastructure. Closing down
its Canadian stores, Target focused on strengthening its online
presence. But two massive data
breach incidents in 2013 and 2014 affected over 100 million of
its customers and weakened
Target’s sales significantly. In order to keep its market share on
a par with competitors such as
Walmart and Amazon, Target clearly has challenges to be met.
CASE 2 9 Staples: The Fierce Battle Between Brick and Mortar
vs. Online Sales 29-1
(Contributors: Alan N. Hoffman and Natalia Gold)
With a focus on convenience and a wide range of product
offerings, Staples was the world’s
largest office supplies retailer. The office supply sector had
almost no barriers to entry as capital
costs were low compared to other retail industries. No licensing
requirements were necessary,
easing the burden on new entrants. The low level of
differentiation of goods between one office
supply store and the next, forced new entrants to provide either
niche or specialty products
to compete and often in the online realm. As the retail industry
had been trending towards
e-commerce, Staples’ traditional brick and mortar stores were
costing it dearly. The global office
supplies leader found it increasingly difficult to compete on the
Internet.
INDUSTRY SIx: TRANSPORTATION
CASE 3 0 Tesla Motors, Inc.: The First U.S. Car Company IPO
Since 1956 30-1
(Contributor: Alan N. Hoffman)
Tesla Motors was founded in 2004 to produce electric
automobiles. Its first car, the Tesla
Roadster, sold for US$101,000. It could accelerate from 0 to 60
mph in 3.9 seconds, and cruise
for 236 miles on a single charge. In contrast to existing
automakers, Tesla sold and serviced its
cars through the Internet and its own Tesla stores. With the goal
of building a full line of electric
vehicles, Tesla Motors faces increasing competition from
established automakers. How can Tesla
Motors succeed in an industry dominated by giant global
competitors?
CASE 3 1 TomTom: New Competition Everywhere! 31-1
(Contributor: Alan N. Hoffman)
TomTom, an Amsterdam-based company that provides
navigation services and devices, led the
navigation systems market in Europe and is second in popularity
in the United States. However,
the company is facing increasing competition from other
platforms using GPS technology, like
cell phones and Smartphones with built-in navigation functions.
As its primary markets in the
United States and Europe mature, how can the company ensure
its future growth and success?
INDUSTRY SEVEN: MANUFACTURING
CASE 3 2 General Electric, GE Capital, and the Financial
Crisis of 2008: The Best of the
Worst in the Financial Sector? 32-1
(Contributor: Alan N. Hoffman)
The financial services industry was, by definition, volatile, and
GE Capital was particularly hard
hit by the economic recession of 2008. With the credit markets
illiquid and financial markets
falling, GE Capital found it was overexposed to commercial real
estate and foreign residential
mortgages. At this point, GE’s parent corporation stepped in,
began reorganizing GE Capital,
and significantly downsized the unit. GE Capital hoped to see
continued sustainable earnings
growth with growing margins and lower portfolio risk, and to
return money to investors and
resume paying dividends to its parent company.
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CASE 3 3 Snap-on Tools: A Victim of Its Own Success 33-1
(Contributor: Alan N. Hoffman)
For 93 years, Snap-on Tools had firmly established itself as an
innovative premium tool
manufacturer serving the automotive industry. In recent years,
Snap-on Tools started to expand
its product lines to engineering industries including aerospace,
aviation, and oil and gas. It also
began to give technical education to build the skilled labor base
in the US—its largest market that
constituted 65% of all revenue. Snap-on feared that its
overdependence on the US market could
make its business and operations vulnerable to country-specific
trends as well as increase the
company’s exposure to local factors such as severe weather
conditions, labor strikes, or changes
in regulations.
GLOSSARY G-1
NAME INDEx I-1
SUBJECT INDEx I-6
new
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Preface
Welcome to the 15th edition of Strategic Management and
Business Policy! All of the
chapters have been updated and we have added one new chapter
on Global Strategy.
In addition, we have added 13 brand-new cases (Target,
American Red Cross, Sonic
Restaurants, Harley Davidson, Staples, Chipotle, Uber, Pandora
Internet Radio,
Snap-on Tools, Google, Pepsi, Town Sports International, and
JC Penney). Many of
the cases are exclusive to this edition! Although we still make a
distinction between
full-length and mini cases, we have interwoven them throughout
the book to better
identify them with their industries.
The theme that runs throughout all 13 chapters of this edition
continues our view
from the 14th edition that there are three strategic issues that
comprise the corner-
stone all organizations must build upon to push their businesses
forward. Those are
globalization, innovation, and sustainability. Each chapter
incorporates specific
vignettes about these three themes. We strive to be the most
comprehensive and prac-
tical strategy book on the market, with chapters ranging from
corporate governance
and social responsibility to competitive strategy, functional
strategy, and strategic
alliances.
FEATURES NEW TO THIS 15TH EDITION
This edition of the text has:
■■ A completely new Chapter (9) on Global Strategy. While we
discuss globalization
in every chapter of the book, including a Global Issues section
in each chapter,
we have called out a stand-alone chapter to address the key
issues of entry, inter-
national coordination, stages of international development,
international employ-
ment, and measurement of performance.
■■ New and updated vignettes on sustainability (which is
widely defined as business
sustainability), globalization (which we view as an expectation
of business), and
innovation (which is the single most important element in
achieving competitive
advantage) appear in every chapter of the text.
■■ Every example, chapter opening, and story has been
updated. This includes chap-
ter opening vignettes examining companies such as: Tesla,
Pizza Hut, UNIQLO,
Kärcher, Purbani Group, and United Airlines among many
others.
■■ Resource-based analysis and more specifically the VRIO
framework (Chapter 5)
has been added to the toolbox of students’ understanding of
core competencies
and competitive advantage with a significant addition of
material and a practical
example.
21
A01_WHEE5488_15_GE_FM.indd 21 7/13/17 4:01 PM
■■ Extensive additions have been made to the text from both
strategy research and
practical experience.
■■ Thirteen new comprehensive cases have been added to
support the 14 popular full-
length cases and 6 mini-cases carried forward from past
editions. Of the 33 cases
appearing in this book, 19 are exclusive and do not appear in
other books.
■■ One of the new cases deals with privacy (Google and the
Right to Be Forgotten).
■■ One of the new cases deals with governance (American Red
Cross).
■■ One of the new cases deals with conscious capitalism
(Chipotle).
■■ Two of the new cases deal with international issues (Uber,
Harley Davidson).
■■ One of the new cases involves Internet companies (Pandora
Internet Radio).
■■ One of the new cases deals with Sports and Leisure (Town
Sports Int’l).
■■ One of the new cases deals with Apparel (J.C. Penney).
■■ Three of the new cases deal with Food and Beverages
(Pepsi, Sonic Restaurants).
■■ Two of the new cases deal with Retailing (Target, Staples).
■■ One of the new cases deals with Manufacturing (Snap-on
Tools).
HOW THIS BOOk IS DIFFERENT FROM OTHER STRATEGY
TExTBOOkS
This book contains a Strategic Management Model that runs
through the first 12 chap-
ters and is made operational through the Strategic Audit, a
complete case analysis
methodology. The Strategic Audit provides a professional
framework for case analysis
in terms of external and internal factors and takes the student
through the generation
of strategic alternatives and implementation programs.
To help the student synthesize the many factors in a complex
strategy case, we
developed three useful techniques:
■■ The External Factor Analysis (EFAS) Table in Chapter 4
■■ This reduces the external opportunities and threats to the 8
to 10 most important
external factors facing management.
■■ The Internal Factor Analysis (IFAS) Table in Chapter 5
■■ This reduces the internal strengths and weaknesses to the 8
to 10 most important
internal factors facing management.
■■ The Strategic Factor Analysis Summary (SFAS) Matrix in
Chapter 6
This condenses the 16 to 20 factors generated in the EFAS and
IFAS tables into
the 8 to 10 most important (strategic) factors facing the
company. These strategic
factors become the basis for generating alternatives and act as a
recommendation
for the company’s future direction.
Suggestions for case analysis are provided in Appendix 13.B
(end of Chapter 13)
and contain step-by-step procedures on how to use a strategic
audit in analyzing a case.
This appendix includes an example of a student-written
strategic audit. Thousands of
students around the world have applied this methodology to
case analysis with great
success. The Case Instructor’s Manual contains examples of
student-written strategic
audits for each of the full-length comprehensive strategy cases.
22 PREFACE
A01_WHEE5488_15_GE_FM.indd 22 7/13/17 4:01 PM
FEATURES
This edition contains many of the same features and content that
helped make previ-
ous editions successful. Some of the features include the
following:
■■ A strategic management
model runs throughout the
first 12 chapters as a unify-
ing concept. (Explained in
Chapter 1)
■■ The strategic audit, a way to opera-
tionalize the strategic decision-
making process, serves as a checklist
in case analysis. (Chapter 1)
■■ Corporate governance is examined in
terms of the roles, responsibilities, and
interactions of top management and the
board of directors. (Chapter 2)
■■ Social responsibility and managerial ethics are
examined in detail in terms of how they affect
strategic decision making. They include the pro-
cess of stakeholder analysis and the concept of
social capital. (Chapter 3)
PREFACE 23
3534
Basic Concepts of
Strategic
Management
C h a p t e r 1
1-5. Describe the basic model of strategic man-
agement and its components
1-6. Identify some common triggering events
that act as stimuli for strategic change
1-7. Explain strategic decision-making modes
1-8. Use the strategic audit as a method
of analyzing corporate functions and
activities
1-1. Discuss the benefits of strategic
management
1-2. Explain how globalization, innovation,
and environmental sustainability influence
strategic management
1-3. Discuss the differences between the theo-
ries of organizations
1-4. Discuss the Activities where learning orga-
nizations excel
Learning Objectives
After reading this chapter, you should be able to:
Toyota Motors Co.
In 1937, Kiichiro Toyoda founded the Toyota Motor
Corporation, head-
quartered in Aichi Prefecture, Japan. The company, now headed
by Akio
Toyoda, the President and Representative Director, has a capital
of around
$179,399 million. Its primary business activities involve
automotive manu-
facturing. As of March 2016, the company employs around
348,977 people.
Sakichi Toyoda, the founder of Toyota Industries, set certain
Guiding
Principles that reflect Toyota’s organizational culture and
values, and are the
basis for the corporate management philosophy. These were
first revised in
1992, and again in 1997, to support its operations in a
multicultural environment.
They were modified in response to the societal changes and the
company’s business
structure, which support its global vision, strategies, and
operations worldwide. An example of its strategy to
keep with the changing times is the Toyota Way 2001, which
focuses on CSR and customer orientation, innovative
management, and the nurturing of its employees’ creativity and
teamwork, mutual trust, and respect between
labor and management. At the heart of the Toyota Way are two
pillars—continuous improvement and respect
for people. These are supported by five values: challenge,
continuous improvement (kaizen), seeing for yourself
(genchi genbutsu), respect, and teamwork.
In 1997, Thailand, a regional hub of Toyota’s auto
manufacturing industry in ASEAN, faced an economic crisis
resulting from over-investment in real estate and a liberal
financing policy. Toyota Motor Thailand Co., Ltd. (TMT)
subsequently encountered huge losses. To overcome the crisis
various actions were taken—the TMT first requested
and received two capital injections, totaling US$200 million,
from Toyota Motor Corporation in Japan. However, since
the automotive market was down by about 75%, the TMT had to
use a job-sharing approach to retain its skilled, but
redundant, workforce. Together with this measure, the company
observed it’s “no lay-off” policy by sending about
200 idle associates to Japan for training, while others assisted
their local dealers. To avoid further losses, TMT focused
on 100% localization of parts and took advantage of export
opportunities. Undertaking new business reforms, such
as online management of vehicle supply and demand and the
formation of project teams in finance and marketing,
helped boost new vehicle sales. For dealers and suppliers, TMT
granted credit lines and short-term loans.
Pearson MyLab Management®
Improve Your Grade!
Over 10 million students improved their results using the
Pearson MyLabs. Visit mymanagementlab.com
for simulations, tutorials, and end-of-chapter problems.
Putting Strategy
into Action
Developing
Long-range Plans
Monitoring
Performance
Feedback/Learning: Make corrections as needed
Gathering
Information
Strategy
Implementation:
Strategy
Formulation:
Evaluation
and Control:
Environmental
Scanning:
Societal
Environment:
General forces
Natural
Environment:
Resources and
climate
Task
Environment:
Industry analysis
Structure:
Chain of command
Culture:
Beliefs, expectations,
values
Resources:
Assets, skills,
competencies,
knowledge
Activities
needed to
accomplish
a plan Cost of the
programs
Sequence
of steps
needed to
do the job
What
results to
accomplish
by when Plan to
achieve the
mission &
objectives Broad
guidelines
for decision
making
Mission
Internal
External
Programs
and Tactics
Budgets
Procedures
Performance
Objectives
Strategies
Policies
Actual results
Reason for
existence
M01B_WHEE5488_15_GE_C01.indd 34-35 7/13/17 3:55 PM
Introduction to
Strategic
Management
and Business
Policy
PA R T1
M01A_WHEE2050_15_SE_P01.indd 1 9/9/16 1:06 PM
46 PART 1 Introduction to Strategic Management and
Business Policy
Highly involved boards tend to be very active. They take their
tasks of moni-
toring, evaluating and influencing, and initiating and
determining very seriously;
they provide advice when necessary and keep management alert.
As depicted in
Figure 2–1, their heavy involvement in the strategic
management process places them
in the active participation or even catalyst positions. Although
74% of public cor-
porations have periodic board meetings devoted primarily to the
review of overall
company strategy, the boards may not have had much influence
in generating the
plan itself.11 The same global survey of directors by McKinsey
& Company found that
directors devote more time to strategy than any other area.
Those boards reporting
high influence typically shared a common plan for creating
value and had healthy
debate about what actions the company should take to create
value. Together with
top management, these high-influence boards considered global
trends and future
scenarios and developed plans. In contrast, those boards with
low influence tended
not to do any of these things.12 Nevertheless, studies indicate
that boards are becom-
ing increasingly active.
These and other studies suggest that most large publicly owned
corporations have
boards that operate at some point between nominal and active
participation. As a board
becomes less involved in the affairs of the corporation, it moves
farther to the left
on the continuum (see Figure 2–1). On the far left are passive
phantom or rubber-
stamp boards that typically never initiate or determine strategy
unless a crisis occurs. In
these situations, the CEO who also usually serves as Chairman
of the Board (although
we see the same situation in active boards), personally
nominates all directors and
works to keep board members under his or her control by giving
them the “mushroom
treatment”—throw manure on them and keep them in the dark!
Generally, the smaller the corporation, the less active is its
board of directors in
strategic management.13 In an entrepreneurial venture, for
example, the privately held
corporation may be 100% owned by the founders—who also
manage the company.
In this case, there is no need for an active board to protect the
interests of the owner-
manager shareholders—the interests of the owners and the
managers are identical.
FIGURE 2–1 Board of Directors’ Continuum
DEGREE OF INVOLVEMENT IN STRATEGIC
MANAGEMENT
Low
(Passive)
Rubber
StampPhantom
Never knows
what to do, if
anything; no
degree of
involvement.
Formally reviews
selected issues
that o�cers
bring to its
attention.
Involved to a
limited degree
in the perfor-
mance or review
of selected key
decisions,
indicators, or
programs of
management.
Approves,
questions, and
makes final de-
cisions on mis-
sion, strategy,
policies, and
objectives. Has
active board
committees.
Performs fiscal
and manage-
ment audits.
Takes the
leading role in
establishing
and modifying
the mission,
objectives,
strategy, and
policies. It has
a very active
strategy
committee.
Permits o�cers
to make all
decisions. It
votes as the
o�cers recom-
mend on action
issues.
Minimal
Review
Nominal
Participation
Active
Participation Catalyst
High
(Active)
Low High
SOURCE: T. L. Wheelen and J. D. Hunger, “Board of Directors’
Continuum,” Copyright © 1994 by Wheelen and
Hunger Associates. Reprinted by permission.
M02_WHEE2050_15_SE_C02.indd 46 9/9/16 12:16 PM
CHAPTER 3 Social Responsibility and Ethics in Strategic
Management 73
a business corporation need profits to survive and grow.
“Maximizing profits is like
maximizing food.” Thus, contends Byron, maximization of
profits cannot be the primary
obligation of business.2
As shown in Figure 3–1, Archie Carroll proposed that the
managers of business
organizations have four responsibilities: economic, legal,
ethical, and discretionary.3
1. Economic responsibilities of a business organization’s
management are to produce
goods and services of value to society so that the firm may
repay its creditors and
increase the wealth of its shareholders.
2. Legal responsibilities are defined by governments in laws
that management is
expected to obey. For example, U.S. business firms are required
to hire and promote
people based on their credentials rather than to discriminate on
non-job-related
characteristics such as race, gender, or religion.
3. Ethical responsibilities of an organization’s management are
to follow the generally
held beliefs about behavior in a society. For example, society
generally expects firms
to work with the employees and the community in planning for
layoffs, even though
no law may require this. The affected people can get very upset
if an organization’s
management fails to act according to generally prevailing
ethical values.
4. Discretionary responsibilities are the purely voluntary
obligations a corpora-
tion assumes. Examples are philanthropic contributions, training
the hard-core
unemployed, and providing day-care centers. The difference
between ethical and
discretionary responsibilities is that few people expect an
organization to fulfill
discretionary responsibilities, whereas many expect an
organization to fulfill ethi-
cal ones.4
Carroll lists these four responsibilities in order of priority. A
business firm must first
make a profit to satisfy its economic responsibilities. To
continue in existence, the firm
must follow the laws, thus fulfilling its legal responsibilities.
There is evidence that com-
panies found guilty of violating laws have lower profits and
sales growth after convic-
tion.5 On this point, Carroll and Friedman are in agreement.
Carroll, however, goes
further by arguing that business managers have responsibilities
beyond economic and
legal ones.
Having satisfied the two basic responsibilities, according to
Carroll, a firm should
look to fulfilling its social responsibilities. Social
responsibility, therefore, includes both
ethical and discretionary, but not economic and legal,
responsibilities. A firm can fulfill
its ethical responsibilities by taking actions that society tends to
value but has not yet
put into law. When ethical responsibilities are satisfied, a firm
can focus on discretion-
ary responsibilities—purely voluntary actions that society has
not yet decided to expect
FIGURE 3–1
Responsibilities of
Business
Discretionary
Ethical
LegalEconomic
Social
Responsibilities
SOURCE: Suggested by Archie Carroll in A. B. Carroll, “A
Three Dimensional Conceptual Model of Corpo-
rate Performance,” Academy of Management Review (October
1979), pp. 497–505; A. B. Carroll, “Managing
-Ethically with Global Stakeholders: A Present and Future
Challenge,” Academy of Management Executive
(May 2004), pp. 114–120; and A. B. Carroll, “The Pyramid of
Corporate Social Responsibility: Toward the
Moral Management of Organizational Stakeholders,” Business
Horizons (July–August 1991), pp. 39–48.
M03_WHEE2050_15_SE_C03.indd 73 9/9/16 12:17 PM
A01_WHEE5488_15_GE_FM.indd 23 7/13/17 4:01 PM
280
Strategy
Implementation:
Global Strategy
C H A P T E R 9
Improve Your Grade!
Over 10 million students improved their results using the
Pearson MyLabs. Visit mymanagementlab.com
for simulations, tutorials, and end-of-chapter problems.
Societal
Environment:
General forces
Natural
Environment:
Resources and
climate
Task
Environment:
Industry analysis
Structure:
Chain of command
Culture:
Beliefs, expectations,
values
Resources:
Assets, skills,
competencies,
knowledge
Activities
needed to
accomplish
a plan Cost of the
programs
Sequence
of steps
needed to
do the job
Reason for
existence
What
results to
accomplish
by when Plan to
achieve the
mission &
objectives Broad
guidelines
for decision
making
RReason ffor
Mission
NNaturall
Structure:
WhWhatt
l
h
PlPlan to
hi the
BroB dad
id li
A tActi iivitities
d d
h
CCostt of tf thhe
SeqSequenuencece
f
Internal
External
Programs
and Tactics
Budgets
Procedures
Performance
Objectives
Strategies
Policies
Actual results
Putting Strategy
into Action
Strategy
Implementation:
Developing
Long-range Plans
Strategy
Formulation:
Monitoring
Performance
Evaluation
and Control:
Gathering
Information
Environmental
Scanning:
Feedback/Learning: Make corrections as needed
281
9-4. Explain how companies can improve their
staffing efforts as they expand beyond
their home country
9-5. Discuss the unique issues related to Mea-
suring Organizational performance that
are presented with the administration of
atruly international company
9-1. Describe the means of entry by which an
organization can do business in another
country
9-2. Explain the elements of International Stra-
tegic Alliances that lead to success
9-3. Discuss the stages of International
Development
Learning Objectives
After reading this chapter, you should be able to:
U.S. Immigration Policy and Founders of Entrepre-
neurial Startups
Few issues are as contentious around the world as is
immigration and
foreign-born workers. The whole conversation gets more
confused in
the United States when foreign-born students of U.S. colleges
and uni-
versities start-up new companies. There are no visas specifically
designed
for foreign-born students who start up their own companies. The
focus
of most visa efforts revolves around the H-1B for ‘skilled’
foreign workers.
There is a lottery each year for the 65,000 slots and the
additional 20,000 slots for
graduates with advanced degrees. All of these slots presume
that the person receiving
the visa is an employee who works for an established U.S.
company. The founder of a new firm might not be
receiving compensation early on and even if he or she is paid,
they are not employees but owners.
According to the Kauffman Foundation while 13% of U.S.
population is foreign-born, they make up 24%
of the tech and engineering companies formed and a whopping
44% of those formed in the Silicon Valley.
These entrepreneurs have a long visa battle ahead of them to be
able to stay in the United States with their
new companies. They generally apply for a so-called ‘rock star’
visa (Justin Beiberand other artists have one).
Among the founders that failed to secure this visa and left the
country was WhatsApp CEO Jan Koum, Snapdeal
founder Kunal Bahl, and Instagram’s technical lead Mike
Krieger. Bahl graduated from Wharton and has now
built a business valued at over US$5 Billion with more than
4,000 employees in India.
Addressing how to operate a global company involves a number
of difficult operating decisions that
includes the staffing of the company and how foreign-born
workers are treated.
SOURCES: “No Country for Startup Founders,” Bloomberg
BusinessWeek, February 15–21, 2016, pp. 27–28 D. Stangler&
J. Wiens, “The Economic Case for Welcoming Immigrant
Entrepreneurs,” EwingMarion Kauffman Foundation, September
8,
2015 (http://www.kauffman.org/what-we-
do/resources/entrepreneurship-policy-digest/the-economic-case-
for-welcoming
-immigrant-entrepreneurs); L. Robbins, “New U.S. Rule
Extends Stay for Some Foreign Graduates,” New York Times,
March 9, 2016
(http://www.nytimes.com/2016/03/09/nyregion/new-us-rule-
extends-stay-for-some-foreign-graduates
.html?_r=0).
Pearson MyLab Management®
■■ Equal emphasis is placed on environmental
scanning of the societal environment as well as
on the task environment. Topics include fore-
casting and Miles and Snow’s typology in addi-
tion to competitive intelligence techniques and
Porter’s industry analysis. (Chapter 4)
■■ Core and distinctive competencies are exam-
ined within the framework of the resource-
based view of the firm and utilizing the VRIO
framework. (Chapter 5)
■■ Organizational analysis includes material on
business models, supply chain management, and
corporate reputation. (Chapter 5)
■■ Internal and external strategic factors are em-
phasized through the use of specially designed
EFAS, IFAS, and SFAS tables. (Chapters 4, 5,
and 6)
■■ Functional strategies are examined in light of
outsourcing. (Chapter 8)
■■ Three chapters deal with issues
in strategy implementation, such
as organizational and job design,
as well as strategy-manager fit,
action planning, and corporate
culture. In addition we address
Global Strategy as a unique im-
plementation issue. (Chapters 9,
10 and 11)
■■ A separate chapter on evaluation
and control explains the impor-
tance of measure-
ment and incentives
to organizational
p e r f o r m a n c e .
(Chapter 12)
■■ Suggestions for in-depth case analysis provide a complete
listing of financial
ratios, recommendations for oral and written analysis, and ideas
for further
research. (Chapter 13)
24 PREFACE
134 PART 2 Scanning the Environment
Pierre Beaudoin stepped down in 2015 as the company
continued to spiral down-
ward. The C-Series has yet to make any real penetration in the
market with orders of less
than 250 planes (and none in the past 1½ years) as of 12/31/15
compared to 3,072 orders
for Boeing’s 737 and 4,471 for Airbus’s 320. As the investment
of billions in the program
was underway, the company decided to launch two new business
jets further stretching
resources.
The company has invested over $5 billion in the C-Series alone
and has had a net negative
cash burn for the past five years. The stock is now worth one-
tenth of what it was in 2011
and the company is asking for a bailout from the Canadian
government as they lay off nearly
10% of their workforce.
SOURCES: S. Deveau & F. Tomesco, “Why Bombardier Is
Struggling to Build Bigger Planes,” Bloomberg
Business, February 4, 2016; A. Petroff, “Bombardier cutting
7,000 jobs,” CNN Money; February 17, 2016
(money.cnn.com/2016/02/17/news/companies/bombardier-job-
cuts-canada-europe/index.html);
http://www.bombardier.com/en/about-us/history.html; F.
Tomesco, “Quebec eyes fresh Bombardier aid
absent federal investment,” The Globe and Mail, February 10,
2016, http://www.theglobeandmail.com
/report-on-business/quebec-eyes-fresh-bombardier-aid-absent-
federal-investment/article28701038/
A Resource-Based Approach to Organizational
analysis—Vrio
Scanning and analyzing the external environment for
opportunities and threats is nec-
essary for the firm to be able to understand its competitive
environment and its place
in that environment. It is the absolute starting place for
strategic analysis. However, in
order for the organization to thrive, the senior leadership team
must look within the
corporation itself to identify internal strategic factors—critical
strengths and weaknesses
that are likely to determine whether a firm will be able to take
advantage of opportuni-
ties while avoiding threats. This internal scanning, often
referred to as organizational
analysis, is concerned with identifying, developing, and taking
advantage of an organiza-
tion’s resources and competencies.
CORE AND DISTINCTIVE COMPETENCIES
Resources are an organization’s assets and are thus the basic
building blocks of the
organization. They include tangible assets (such as its plant,
equipment, finances, and
location), human assets (the number of employees, their skills,
and motivation), and
intangible assets (such as its technology [patents and
copyrights], culture, and reputa-
tion).1 Capabilities refer to a corporation’s ability to exploit its
resources. They consist
of business processes and routines that manage the interaction
among resources to turn
inputs into outputs. For example, a company’s marketing
capability can be based on
the interaction among its marketing specialists, distribution
channels, and salespeople.
A capability is functionally based and is resident in a particular
function. Thus, there
are marketing capabilities, manufacturing capabilities, and
human resource manage-
ment capabilities. When these capabilities are constantly being
changed and recon-
figured to make them more adaptive to an uncertain
environment, they are called
dynamic capabilities.2 A competency is a cross-functional
integration and coordination
5-1. Apply the
resource-based view
of the firm and the
VRIO framework
to determine core
and distinctive
competencies
M05_WHEE2050_15_SE_C05.indd 134 9/9/16 12:50 PM
324
Strategy
Implementation:
Staf�ng and Directing
C H A P T E R 11
Improve Your Grade!
Over 10 million students improved their results using the
Pearson MyLabs. Visit mymanagementlab.com
for simulations, tutorials, and end-of-chapter problems.
Societal
Environment:
General forces
Natural
Environment:
Resources and
climate
Task
Environment:
Industry analysis
Structure:
Chain of command
Culture:
Beliefs, expectations,
values
Resources:
Assets, skills,
competencies,
knowledge
Activities
needed to
accomplish
a plan Cost of the
programs
Sequence
of steps
needed to
do the job
Reason for
existence
What
results to
accomplish
by when Plan to
achieve the
mission &
objectives Broad
guidelines
for decision
making
RReason ffor
Mission
NNaturall
Structure:
WhWhatt
l
h
PlPlan to
hi the
BroB dad
id li
A tActi iivitities
d d
h
CCostt of tf thhe
SeqSequenuencece
f
Internal
External
Programs
and Tactics
Budgets
Procedures
Performance
Objectives
Strategies
Policies
Actual results
Putting Strategy
into Action
Strategy
Implementation:
Developing
Long-range Plans
Strategy
Formulation:
Monitoring
Performance
Evaluation
and Control:
Gathering
Information
Environmental
Scanning:
Feedback/Learning: Make corrections as needed
Pearson MyLab Management®
325
11-3. Utilize an action planning framework to
implement an organization’s MBO and
TQM initiatives
11-1. Explain the link between strategy and
staffing decisions
11-2. Discuss how leaders manage corporate
culture
Learning Objectives
After reading this chapter, you should be able to:
Workplace Discrimination and Public Image
While the legal context of what constitutes workplace
discrimination
is constantly evolving, public perception can impact companies
in vir-
tually any industry. In 2015, the U.S. Equal Employment
Opportunity
Commission (EEOC) received almost 90,000 charges of
workplace dis-
crimination. These included discrimination complaints related
to race,
color, sex, age, religion, pregnancy, disability, genetic
information, and
national origin.
One of the more contentious issues has developed around the
Affordable
Care Act (ACA), a movement nationwide to recognize same-
sex marriages, and theŽLGBT
community. Companies including Wal*Mart, BNSF Railroad,
Saks Fifth Avenue, SkyWest Airlines, and Pepperdine
University have cases pending against them in the federal court
system. These plaintiffs argue that they are
being discriminated against because of their sex.
Wal*Mart extended spousal health coverage to same-sex
marriages (where legal) in January 2014, however
those denied prior to that point have formed a class action suit
against the company for discriminating based
upon the sex of the partner. As the country moved toward
increasing recognition of same-sex marriage (37
states had statutes on the books before the June 2015 Supreme
Court ruling that allowed same-sex couples
to marry) more and more companies decided to include same-
sex married couples in their employees benefit
offerings. Today, it presents not only a business issue, but a
public perception issue. Should Wal*Mart fight the
retroactive assignment of benefits or should the company settle
with plaintiffs?
SOURCES: “If You Are Anti Are You Anti?” Bloomberg
BusinessWeek, February 22–28, 2016, pp. 23–24; “State Same-
Sex
Marriage State Laws Map,” Governing,
(http://www.governing.com/gov-data/same-sex-marriage-civil-
unions-doma-laws-by
-state.html) (Accessed 3/17/16); S. Heasley, “Workplace
Disability Discrimination Claims At Record High,” Disability
Scoop,
February 17, 2016
(https://www.disabilityscoop.com/2016/02/17/workplace-
claims-record-high/21926/).
A01_WHEE5488_15_GE_FM.indd 24 7/13/17 4:01 PM
http://www.bombardier.com/en/about-us/history.html
http://www.theglobeandmail.com//report-on-business/quebec-
eyes-fresh-bombardier-aid-absent-federal-
investment/article28701038
http://www.theglobeandmail.com//report-on-business/quebec-
eyes-fresh-bombardier-aid-absent-federal-
investment/article28701038
http://www.governing.com/gov-data/same-sex-marriage-civil-
unions-doma-laws-by-state.html
http://www.governing.com/gov-data/same-sex-marriage-civil-
unions-doma-laws-by-state.html
https://www.disabilityscoop.com/2016/02/17/workplace-claims-
record-high/21926
■■ The strategic audit worksheet is based on the
time-tested strategic audit and is designed to help
students organize and structure daily case prepa-
ration in a brief period of time. The worksheet
works exceedingly well for checking the level of
daily student case preparation—especially for
open class discussions of cases. (Chapter 13)
■■ An experiential exercise focusing on
the material covered in each chapter
helps the reader apply strategic con-
cepts to an actual situation.
■■ A list of key terms and the pages on
which they are discussed let the reader
keep track of important concepts as they
are introduced in each chapter.
PREFACE 25
FIGURE 13–1
Strategic Audit
Worksheet
Analysi s
Strategic Audit Heading (+) Factors (–) Factors Comments
I. Current Situation
A. Past Corporate Performance Indexes
B. Strategic Posture:
Current Mission
Current Objectives
Current Strategies
Current Policies
SWOT Analysis Begins:
II. Corporate Governance
A. Board of Directors
B. Top Management
III. External Environment (EFAS):
Opportunities and Threats (SWOT)
A. Natural Environment
B. Societal Environment
C. Task Environment (Industry Analysis)
IV . Internal Environment (IFAS):
Strengths and Weaknesses (SWOT)
A. Corporate Structure
B. Corporate Culture
C. Corporate Resources
1. Marketing
2. Finance
3. Research and Development
4. Operations and Logistics
5. Human Resources
6. Information Technology
V. Analysis of Strategic Factors (SFAS)
A. Key Internal and External
Strategic Factors (SWOT)
B. Review of Mission and Objectives
SWOT Analysis Ends. Recommendation Begins:
VI. Alternatives and Recommendations
A. Strategic Alternatives—pros and cons
B. Recommended Strategy
VII. Implementation
VIII. Evaluation and Control
NOTE: See the complete Strategic Audit on pages 32–39. It lists
the pages in the book that discuss each of
the eight headings.
SOURCE: T. L. Wheelen and J. D. Hunger, “Strategic Audit
Worksheet.” Copyright © 1985, 1986, 1987, 1988,
1989, 2005, and 2009 by T. L. Wheelen. Copyright © 1989,
2005, and 2009 by Wheelen and Hunger Associ-
ates. Revised 1991, 1994, and 1997. Reprinted by permission.
Additional copies available for classroom use
in Part D of the Case Instructor’s Manual and on the Prentice
Hall Web site (www.prenhall.com/wheelen).
M13B_WHEE2050_15_SE_C13.indd 356 9/9/16 1:03 PM
162 PART 2 Scanning the Environment
MyManagementLab®
Go to mymanagementlab.com to complete the problems marked
with this icon .
End of Chapter SUMMARY
Every day, about 17 truckloads of used diesel engines and other
parts are dumped at a
receiving facility at Caterpillar’s remanufacturing plant in
Corinth, Mississippi. The filthy
iron engines are then broken down by two workers, who
manually hammer and drill for
half a day until they have taken every bolt off the engine and
put each component into its
own bin. The engines are then cleaned and remade at half of the
cost of a new engine and
sold for a tidy profit. This system works at Caterpillar because,
as a general rule, 70% of
the cost to build something new is in the materials and 30% is
in the labor. Remanufactur-
ing simply starts the manufacturing process over again with
materials that are essentially
free and which already contain most of the energy costs needed
to make them. The would-
be discards become fodder for the next product, eliminating
waste, and cutting costs.
Caterpillar’s management was so impressed by the
remanufacturing operation that they
made the business a separate division in 2005. The unit earned
more than US$1 billion in
sales in 2005 and by 2012 employed more than 8500 workers in
16 countries.
Caterpillar’s remanufacturing unit was successful not only
because of its ability to
wring productivity out of materials and labor, but also because
it designed its prod-
ucts for reuse. Before they are built new, remanufactured
products must be designed
for disassembly. In order to achieve this, Caterpillar asks its
designers to check a
“Reman” box on Caterpillar’s product development checklist.
The company also
needs to know where its products are being used in order to take
them back—known
as the art of reverse logistics. This is achieved by Caterpillar’s
excellent relationship
with its dealers throughout the world, as well as through
financial incentives. For
example, when a customer orders a crankshaft, that customer is
offered a remanu-
factured one for half the cost of a new one—assuming the
customer turns in the old
crankshaft to Caterpillar. The products also should be built for
performance with little
regard for changing fashion. Because diesel engines change
little from year to year, a
remanufactured engine is very similar to a new engine and
might perform even better.
Monitoring the external environment is only one part of
environmental scanning.
Strategists also need to scan a corporation’s internal
environment to identify its resources,
capabilities, and competencies. What are its strengths and
weaknesses? At Caterpillar,
management clearly noted that the environment was changing in
a way to make its remanu-
factured product more desirable. It took advantage of its
strengths in manufacturing and
distribution to offer a recycling service for its current customers
and a low-cost alternative
product for those who could not afford a new Caterpillar engine.
It also happened to be an
environmentally friendly, sustainable business model.
Caterpillar’s management felt that
remanufacturing thus provided them with a strategic advantage
over competitors who don’t
remanufacture. This is an example of a company using its
capabilities in key functional
areas to expand its business by moving into a new profitable
position on its value chain.87
brand (p. 149)
business model (p. 138)
capabilities (p. 134)
capital budgeting (p. 150)
competency (p. 134)
conglomerate structure (p. 145)
a core competency (p. 135)
corporate culture (p. 145)
corporate reputation (p. 150)
distinctive competencies (p. 135)
divisional structure (p. 144)
economies of scale (p. 154)
K E Y T E R M S
M05_WHEE2050_15_SE_C05.indd 162 9/9/16 1:14 PM
286 PART 4 Strategy Implementation and Control
Simultaneous pressures for decentralization to be locally
responsive and central-
ization to be maximally efficient are causing interesting
structural adjustments in most
large corporations. This is what is meant by the phrase “think
globally, act locally.”
Companies are attempting to decentralize those operations that
are culturally oriented
and closest to the customers—manufacturing, marketing, and
human resources. At
the same time, the companies are consolidating less visible
internal functions, such
as research and development, finance, and information systems,
where there can be
significant economies of scale.
End of Chapter SUMMARY
Strategy implementation is where “the rubber hits the road.”
Environmental scanning
and strategy formulation are crucial to strategic management
but are only the beginning
of the process. The failure to carry a strategic plan into the day-
to-day operations of the
workplace is a major reason why strategic planning often fails
to achieve its objectives.
It is discouraging to note that in one study nearly 70% of the
strategic plans were never
successfully implemented.76
For a strategy to be successfully implemented, it must be made
action-oriented. This
is done through a series of programs that are funded through
specific budgets and con-
tain new detailed procedures. This is what Sergio Marchionne
did when he implemented
a turnaround strategy as the new Fiat Group CEO in 2004. He
attacked the lethargic,
bureaucratic system by flattening Fiat’s structure and giving
younger managers a larger
amount of authority and responsibility. He and other managers
worked to reduce the
number of auto platforms from 19 to 6 by 2012. The time from
the completion of the
design process to new car production was cut from 26 to 18
months. By 2008, the Fiat
auto unit was again profitable. Marchionne reintroduced Fiat to
the U.S. market in
2012 after a 27-year absence.77 Unfortunately, Fiat struggled to
gain any traction in
the U.S. market. Despite a strong marketing campaign and a
number of cars designed
FIGURE 10–2
Geographic Area
Structure for an MNC
Board of Directors
President
Operating
Companies
U.S.
Operating
Companies
Europe*
Operating
Companies
Latin
America
Operating
Companies
Africa
Operating
Companies
Asia*
Product
Group
B
Product
Group
D
Corporate
Sta�
Product
Group
A
Product
Group
B
Product
Group
C
R&D
*NOTE: Because of space limitations, product groups for only
Europe and Asia are shown here.
M10_WHEE2050_15_SE_C10.indd 286 9/9/16 1:15 PM
CHAPTER 10 Strategy Implementation: Organizing and
Structure 319
Pearson MyLab Management®
Go to mymanagementlab.com to complete the problems marked
with this icon .
specifically for the market, by 2016 sales had stalled at 44,000
cars a year. The company
has remained strongly profitable and even acquired 100% of
Chrysler in 2014.78
This chapter explains how jobs and organizational units can be
designed to sup-
port a change in strategy. We will continue with staffing and
directing issues in strategy
implementation in the next chapter.
Pearson MyLab Management®
Go to mymanagementlab.com for the following assisted-graded
writing questions:
10-1. How do timing tactics impact the strategy implementation
efforts of a company?
10-2. What issues would you consider to be the most important
for a company that is considering the use of a func-
tional structure?
budget (p. 301)
cellular/modular organization
(p. 314)
first mover (p. 299)
geographic-area structure (p. 317)
job design (p. 316)
late movers (p. 299)
market location tactic (p. 299)
matrix structures (p. 310)
network structure (p. 312)
organizational life cycle (p. 309)
procedures (p. 301)
product-group structure (p. 317)
program (p. 298)
reengineering (p. 314)
Six Sigma (p. 315)
stages of corporate development
(p. 304)
strategy implementation (p. 296)
structure follows strategy (p. 303)
synergy (p. 302)
timing tactic (p. 299)
virtual organization (p. 312)
K E Y T E R M S
D I S C U S S I O N Q U E S T I O N S
10-3. Staffing decisions are considered an important
component of strategic planning and the man-
agement process. Why? How is strategy imple-
mentation process connected to the decisions
resulting from a staffing strategy?
10-4. Why is it necessary for an organization to align
its managers with the corporate strategy to
ensure better organizational performance?
10-5. Is downsizing a good strategy for revamping an
organization’s competitiveness when it is facing
major competitive threats in the market?
10-6. Can organizations be controlled by culture?
Explain.
10-7. How is an international staffing strategy different
from a domestic one?
S T R A T E G I C P R A C T I C E E X E R C I S E
The Synergy Game
Yolanda Sarason and Catherine Banbury
Setup
Put three to five chairs on either side of a room, facing
each other, in the front of the class. Put a table in the
middle, with a bell in the middle of the table.
Procedure
The instructor/moderator divides the class into teams
of three to five people. Each team selects a name for
itself. The instructor/moderator lists the team names
on the board. The first two teams come to the front
and sit in the chairs facing each other. The instruc-
tor/moderator reads a list of products or services
M10_WHEE5488_15_GE_C10.indd 319 6/20/17 7:55 AM
A01_WHEE5488_15_GE_FM.indd 25 7/13/17 4:01 PM
http://www.prenhall.com/wheelen
■■ Learning objectives begin each chapter.
■■ Timely, well-researched, and class-tested cases deal with
interesting companies
and industries. Many of the cases are about well-known,
publicly held corpora-
tions—ideal subjects for further research by students wishing to
“update” the
cases.
Both the text and the cases have been class-tested in strategy
courses and revised based
on feedback from students and instructors. The first 12 chapters
are organized around a
strategic management model that begins each chapter and
provides a structure for both
content and case analysis. We emphasize those concepts that
have proven to be most
useful in understanding strategic decision making and in
conducting case analysis. Our
goal was to make the text as comprehensive as possible without
getting bogged down
in any one area. Extensive endnote references are provided for
those who wish to learn
more about any particular topic. All cases are about actual
organizations. The firms
range in size from large, established multinationals to small,
entrepreneurial ventures,
and cover a broad variety of issues. As an aid to case analysis,
we propose the strategic
audit as an analytical technique.
SUPPLEMENTS
At www.pearsonglobaleditions.com/Wheelen instructors can
access teaching
resources available with this text in a downloadable, digital
format. Registra-
tion is simple and gives you immediate access to new titles and
editions. Please
contact your Pearson sales representative for your access code.
As a registered
f aculty member, you can download resource files and receive
immediate access
and i nstructions for installing course management content on
your campus server.
In case you ever need assistance, our dedicated technical
support team is ready
to assist instructors with questions about the media supplements
that accompany
this text. Visit for answers to frequently asked questions. This
title has the follow-
ing electronic resources.
Instructor’s Manuals
Two comprehensive Instructor’s Manuals have been carefully
constructed to accom-
pany this book. The first one accompanies the concepts
chapters; the second one
accompanies the cases.
Concepts Instructor’s Manual
To aid in discussing the 13 strategy chapters, the Concepts
Instructor’s Manual includes:
■■ Suggestions for Teaching Strategic Management: These
include various teaching
methods and suggested course syllabi.
■■ Chapter Notes: These include summaries of each chapter,
suggested answers to
discussion questions, and suggestions for using end-of-chapter
cases/exercises and
part-ending cases, plus additional discussion questions (with
answers) and lecture
modules.
Case Instructor’s Manual
To aid in case method teaching, the Case Instructor’s Manual
includes detailed sugges-
tions for its use, teaching objectives, and examples of student
analyses for each of the
26 PREFACE
A01_WHEE5488_15_GE_FM.indd 26 7/13/17 4:01 PM
http://www.pearsonglobaleditions.com/Wheelen
full-length comprehensive cases. This is the most
comprehensive instructor’s manual
available in strategic management. A standardized format is
provided for each case:
1. Case Abstract
2. Case Issues and Subjects
3. Steps Covered in the Strategic Decision-Making Process
4. Case Objectives
5. Suggested Classroom Approaches
6. Discussion Questions
7. Case Author’s Teaching Note (if available)
8. Student-Written Strategic Audit (if appropriate)
9. EFAS, IFAS, and SFAS Exhibits
10. Financial Analysis—ratios and common-size income
statements (if appropriate)
PowerPoint Slides
PowerPoint slides, provided in a comprehensive package of text
outlines and figures cor-
responding to the text, are designed to aid the educator and
supplement in-class lectures.
Test Item File
The Test Item File contains over 1200 questions, including
multiple-choice, true/false,
and essay questions. Each question is followed by the correct
answer, AACSB cat-
egory, and difficulty rating.
TestGen
TestGen software is preloaded with all of the Test Item File
questions. It allows instruc-
tors to manually or randomly view test questions, and to add,
delete, or modify test-
bank questions as needed to create multiple tests.
VIDEO LIBRARY
Videos illustrating the most important subject topics are
available in the following
format:
■■ MyLab—available for instructors and students, provides
round the clock instant
access to videos and corresponding assessment for Pearson
textbooks.
Contact your local Pearson representative to request access to
either format.
Acknowledgments
We would like to thank the many people at Pearson who helped
make this edition
possible. We are especially grateful to our senior sponsoring
editor, Neeraj Bhalla,
who managed to keep everything on an even keel. We also
would like to thank
Greetal Carolyn Jayanandan, Nicole Suddeth, Dan Tylman,
Claudia Fernandes and
everyone at Pearson who guided the book through the
production and marketing
processes. Special thanks to Kaitlyn Dell’Aquila at Pearson for
her hard work in the
trenches.
PREFACE 27
A01_WHEE5488_15_GE_FM.indd 27 7/13/17 4:01 PM
We are very thankful to Paul D. Maxwell, St. Thomas
University, Miami, FL; Terry
J. Schindler, University of Indianapolis; Anne Walsh, La Salle
University; Angelo Ca-
millo, Woodbury University; Jeannine L. Scherenberg,
Rockford College; William Rei-
sel, St. John’s University; Ronaldo Parente, Florida
International University; Roxana
Wright, Plymouth State University; J. Barry Dickinson, Holy
Family University; The-
odore E. Davis, Jr., PhD, SUNY College at Buffalo; Manzoor
Chowdhury, Lincoln
University; David Olson, California State University at
Bakersfield; and Janis Dietz,
University of La Verne for their constructive criticism of the
14th edition.
We are especially thankful to the many students who tried out
the cases we chose
to include in this book. Their comments helped us find any
flaws in the cases before the
book went to the printer.
We also offer a big thanks to the many case authors who have
provided us with ex-
cellent cases for the 15th edition of this book. We consider
many of these case authors
to be our friends. A special thanks to you!! The adage is true:
The path to greatness is
through others.
Alan Hoffman would like to thank the following colleagues for
their valuable in-
sight, support, and feedback during the writing process: Anne
Nelson, Trena Depel,
Kathy Connolly, John Nicholson, Robert Frisch, Barbara
Gottfried, Bonnie Kornman,
Gail Goldman, Raj Sisodia, Ken Kornman, Donna Gallo, Jeff
Shuman, Anna Forte,
Deb Kennedy, Paula Josephs, Lisa Dinsmore, Alyssa Goldman,
Susan Fleming, Jill
Brown, Lucia Gumbs, Jadwiga Supryn, Cynthia Clark, Natalia
Gold, Aileen Cordette,
Andrea Harding, Martha Bailey, Lew Sudarsky, Ed
Ottensmeyer, Tim Stearns,
Christopher Forte, Roberta Francis, Abbey Nicholson, Sam
Vitali, Michael Page,
Chip Wiggins, Jon Horlink, Vicki Lafarge, Dorothy Feldmann,
Susan Adams, Josh
Senn, Gary Cordette, Merle Gordon, Thom McGillvray, Bob
Cronin, Arthur Hughes,
Jayne Pollack, Susan McGrath, Joe Goldman, Ed Harding,
Lynne Young, Rick Vitali,
Catherine Usoff, and Beverley Earle. Special thanks to Joyce
Vincelette, Kathryn
Wheelen, Patricia Ryan, Jim Schwartz, and Pamela Goldberg
Schwartz.
Lastly, to the many strategy instructors and students who have
relayed to us their
thoughts about teaching the strategy course: We have tried to
respond to your prob-
lems and concerns as best we could by providing a
comprehensive yet usable text cou-
pled with recent and complex cases. To you, the people who
work hard in the strategy
trenches, we acknowledge our debt. This book is yours.
A. N. H.
Needham Heights, Massachusetts
C. E. B.
Durham, North Carolina
Global Edit ion Acknowledgments
Pearson would like to thank Georg Hauer, Stuttgart Technology
University of Applied
Sciences, Humphry Hung, Tung Wah College, Krish Saha,
Birmingham City University,
and Sununta Siengthai, Asian Institute of Technology (A.I.T.),
for their contributions
to the Global Edition.
We would also like to thank David Ahlstrom, Chinese
University of Hong Kong,
Nazih El-Jor, Universite du Saint Esprit Kaslik, Goh See
Kwong, Taylor’s University
Malaysia, and Tan Wei Lian, Taylor’s University.
28 PREFACE
A01_WHEE5488_15_GE_FM.indd 28 7/13/17 4:01 PM
About the Authors
Thomas L. Wheelen, May 30, 1935 – December 24, 2011. DBA,
MBA, BS Cum
Laude (George Washington University, Babson College, and
Boston College,
respectively), College, MBA (1961); Boston College, BS cum
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This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx
This is a special edition of an established title widely use.docx

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This is a special edition of an established title widely use.docx

  • 1. This is a special edition of an established title widely used by colleges and universities throughout the world. Pearson published this exclusive edition for the benefit of students outside the United States and Canada. If you purchased this book within the United States or Canada, you should be aware that it has been imported without the approval of the Publisher or Author. Pearson Global Edition GLOBAL EDITION For these Global Editions, the editorial team at Pearson has collaborated with educators across the world to address a wide range of subjects and requirements, equipping students with the best possible learning tools. This Global Edition preserves the cutting-edge approach and pedagogy of the original, but also features alterations, customization, and adaptation from the North American version. GLOBAL EDITION Strategic M anagem ent and Business Policy G
  • 2. lobalization, Innovation and Sustainability G LO B A L ED IT IO N W heelen • H unger H offm an • Bam ford FIFT EEN T H ED IT
  • 3. IO N Strategic Management and Business Policy Globalization, Innovation and Sustainability FIFTEENTH EDITION Thomas L. Wheelen • J. David Hunger Alan N. Hoffman • Charles E. Bamford Wheelen_15_1292215488_Final.indd 1 24/07/17 8:44 PM • �Pearson�eText—Keeps students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material. The MyLab with Pearson eText provides students with a complete digital learning experience—all in one place. • Writing�Space—Better writers make great learners who perform better in their courses. Designed to help you develop and assess concept mastery and critical thinking,theWritingSpaceoffersasingleplaceto create, track, and grade writing assignments, provide resources, and exchange meaningful, personalized feedback with students, quickly and easily. Thanks to assisted- graded and create-your-own assignments, you decide your level of involvement in evaluating students’ work. Because of integration with Turnitin®, Writing Space can check
  • 4. students’ work for improper citation or plagiarism. • �Branching,�Decision-Making�Simulations—Put your students in the role of manager as they make a series of decisions based on a realistic business challenge. The simulations change and branch based on their decisions, creating various scenario paths. At the end of each simulation, students receive a grade and a detailed report of the choices they made with the associated consequences included. Engage, Assess, Apply with MyLab Management® • �Learning�Catalytics™—Is an interactive, student response tool that uses students’ smartphones, tablets, or laptops to engage them in more sophisticated tasks and thinking. Now included with MyLab with eText, Learning Catalytics enables you to generate classroom discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. • �Reporting�Dashboard—View, analyze, and report learning outcomes clearly and easily, and get the information you need to keep your students on track throughout the course with the new Reporting Dashboard. Available via the MyLab Gradebook and fully mobile-ready, the Reporting Dashboard presents student performance data at the
  • 5. class, section, and program levels in an accessible, visual manner. • �Accessibility�(ADA)—Pearson works continuously to ensure our products are as accessible as possible to all students. The platform team for our Business MyLab products is working toward achieving WCAG 2.0 Level AA and Section 508 standards, as expressed in the Pearson�Guidelines�for�Accessible� Educational�Web�Media. Moreover, our products support customers in meeting their obligation to comply with the Americans with Disabilities Act (ADA) by providing access to learning technology programs for users with disabilities. The following information provides tips and answers to frequently asked questions for those using assistive technologies to access the Business MyLab products. As product accessibility evolves continuously, please email our Accessibility Team at [email protected] for the most up-to- date information. • �LMS�Integration—You can now link from Blackboard Learn, Brightspace by D2L, Canvas, or Moodle to MyManagementLab. Access assignments, rosters, and resources, and synchronize grades with your LMS gradebook. For students, single sign-on provides access to all the
  • 6. personalized learningresourcesthatmakestudyingmoreefficientandeffective. Engage, Assess, Apply with MyLab Management® A L W A Y S L E A R N I N GA L W A Y S L E A R N I N G Wheelen_15_1292215488_ifc_ibc_Final.indd 1 24/07/17 8:45 PM FIFTEENTH EDITION GLOBAL EDITION Alan N. Hoffman Bentley University Strategic Management and Business Policy GLOBALIZATION, INNOVATION, AND SUSTAINABILITY Thomas L. Wheelen Formerly with University of Virginia, Trinity College, Dublin, Ireland Charles E. Bamford University of Notre Dame J. David Hunger
  • 7. Formerly with Iowa State University, St. John’s University A01_WHEE5488_15_GE_FM.indd 1 7/13/17 4:01 PM Vice President, Business Publishing: Donna Battista Director of Portfolio Management: Stephanie Wall Director, Courseware Portfolio Management: Ashley Dodge Senior Sponsoring Editor: Neeraj Bhalla Associate Acquisitions Editor, Global Edition: Ishita Sinha Associate Project Editor, Global Edition: Paromita Banerjee Editorial Assistant: Linda Siebert Albelli Vice President, Product Marketing: Roxanne McCarley Director of Strategic Marketing: Brad Parkins Strategic Marketing Manager: Deborah Strickland Product Marketer: Becky Brown Field Marketing Manager: Lenny Ann Kucenski Field Marketing Assistant: Kristen Compton Product Marketing Assistant: Jessica Quazza Vice President, Production and Digital Studio, Arts and Business: Etain O’Dea Director of Production, Business: Jeff Holcomb Senior Manufacturing Controller, Global Edition: Kay Holman Content Producer, Global Edition: Pooja Aggarwal Managing Producer, Business: Ashley Santora Operations Specialist: Carol Melville Creative Director: Blair Brown Manager, Learning Tools: Brian Surette
  • 8. Content Developer, Learning Tools: Lindsey Sloan Managing Producer, Digital Studio, Arts and Business: Diane Lombardo Digital Studio Producer: Darren Cormier Digital Studio Producer: Alana Coles Media Production Manager, Global Edition: Vikram Kumar Full-Service Project Management and Composi- tion: SPi Global Interior Design: SPi Global Cover Art: kaband/Shutterstock Acknowledgments of third-party content appear on the appropriate page within the text. Pearson Education Limited KAO Two KAO Park Harlow CM17 9NA United Kingdom and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsonglobaleditions.com © Pearson Education Limited 2018 The rights of Thomas L. Wheelen, J. David Hunger, Alan N. Hoffman, and Charles E. Bamford to be identi- fied as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Authorized adaptation from the United States edition, entitled
  • 9. Strategic Management and Business Policy: Globalization, Innovation, and Sustainability, 15th Edition, ISBN 978-0-13-452205-0 by Thomas L. Wheelen, J. David Hunger, Alan N. Hoffman, and Charles E. Bamford, published by Pearson Education © 2018. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: 1-292-21548-8 ISBN 13: 978-1-292-21548-8 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 Typeset in Times Ten Lt Std by SPi Global Printed and bound by Vivar in Malaysia A01_WHEE5488_15_GE_FM.indd 2 7/13/17 4:01 PM
  • 10. http://www.pearsonglobaleditions.com Dedicated to TOM WHEELEN AND DAVID HUNGER Tom originated this book in the late 1970s and with his friend David Hunger brought the first edition to fruition in 1982. What a ride it was! We lost both of these extraordinary men in rapid succession. After battling bone cancer, Tom died in Saint Petersburg, Florida, on December 24, 2011. David died in St. Joseph, Minnesota on April 10, 2014 after fighting cancer himself. It was Tom’s idea from the very beginning to include the latest research and useful material written in such a way that the typical student could read and understand the book without outside assistance. That has been a key reason for the success of the book through its many editions. Tom and David worked in adjoining offices at the McIntire School of Commerce at the University of Virginia where their lifelong collaboration blossomed. Tom’s last months were spent working with the two new co-authors to map out the direction for the 14th edition and we were fortunate to work with David through the early part of the 14th edition update until his fight against his cancer took prior- ity. We thank you both and bid you a fond farewell! This 15th edition is for you! Alan N. Hoffman
  • 11. Charles E. Bamford SPECIAL DEDICATION TO DAVID HUNGER A special dedication in honor of David Hunger to his colleagues, friends, and students— It is our hope and prayer that you found, and continue to find, some joy in your study of Strategic Management and Business Policy and, perhaps, experience a sense of the passion behind the subject matter presented in this textbook. It was originated by two men who were the best of friends and colleagues, Dr. Tom Wheelen (May 30, 1935 – December 24, 2011) and our Dad, Dr. J. David Hunger (May 17, 1941 – April 10, 2014). This will be the first edition we will see without a handwritten note in the front and a dedication to us all. Dad came alive discussing strategy, case management, theory, entrepreneurship, and the daily happenings in the field of management. Even relaxing at the end of the day, he could be found thumbing through a Business Week or journal. Colleagues always knew when he was in their presentations because he was fully engaged, offering questions and happy to share in an animated dialogue. Students speak fondly of being in his class. His dedication to the field never ended. Even up to a month before he died (still undergoing chemotherapy) he insisted on travelling by train from Minnesota to Chicago for a Case Research Conference to run a panel. We are so proud and
  • 12. thankful that Drs. Alan Hoffman and Chuck Bamford knew Tom and Dad and are carrying the torch forward. As his 4 daughters A01_WHEE5488_15_GE_FM.indd 3 7/13/17 4:01 PM 4 DEDICATED and 6 grandchildren, we miss him daily. We lost him far too soon. Finally, our mom, Betty Hunger, who lived with the authorship of this textbook for three quarters of their 45 years together and joked that it was their 5th child, wishes to express just how much she misses Dad and looks forward to seeing him again. Betty, Kari and Jeff, Madison and Megan, Suzi and Nick, Summer and Kacey, Lori and Derek, Merry and Dylan, and Edan and Greyson. We love you David/Dad/GrandDad. To Will Hoffman, the greatest son in the world…. and to our saint Wendy Appel. …. and to Jodi L. Silton, thank you for your kindness and understanding. Alan Hoffman To Yvonne, for your support, advice, encouragement, love, and confidence. To my children Ada, Rob, and Sean and my grandchildren Silas, Isaac, and Clara.
  • 13. Chuck Bamford A01_WHEE5488_15_GE_FM.indd 4 7/13/17 4:01 PM Brief Contents PART ONE Introduction to Strategic Management and Business Policy 33 C H A P T E R 1 Basic Concepts of Strategic Management 34 C H A P T E R 2 Corporate Governance 72 C H A P T E R 3 Social Responsibility and Ethics in Strategic Management 102 PART TWO Scanning the Environment 123 C H A P T E R 4 Environmental Scanning and Industry Analysis 124 C H A P T E R 5 Organizational Analysis and Competitive Advantage 164 PART THREE Strategy Formulation 199 C H A P T E R 6 Strategy Formulation: Business Strategy 200 C H A P T E R 7 Strategy Formulation: Corporate Strategy 224 C H A P T E R 8 Strategy Formulation: Functional Strategy and Strategic Choice 250 PART FOUR Strategy Implementation and Control 279 C H A P T E R 9 Strategy Implementation: Global Strategy 280 C H A P T E R 1 0 Strategy Implementation: Organizing and Structure 294 C H A P T E R 1 1 Strategy Implementation: Staffing and Directing 324
  • 14. C H A P T E R 1 2 Evaluation and Control 348 PART FIVE Introduction to Case Analysis 377 C H A P T E R 1 3 Suggestions for Case Analysis 378 PART SIx Cases in Strategic Management 1-1 GLOSSARY G-1 NAME INDEx I-1 SUBJECT INDEx I-6 5 A01_WHEE5488_15_GE_FM.indd 5 7/13/17 4:01 PM Contents Preface 21 About the Authors 29 PART ONE Introduction to Strategic Management and Business Policy 33 C H A P T E R 1 Basic Concepts of Strategic Management 34 The Study of Strategic Management 37 Phases of Strategic Management 37 Benefits of Strategic Management 38 Globalization, Innovation, and Sustainability: Challenges to Strategic Management 39
  • 15. Impact of Globalization 40 Impact of Innovation 41 Global Issue: ASEAN: REGIONAL TRADE ASSOCIATIONS 42 Impact of Sustainability 42 Theories of Organizational Adaptation 44 Creating a Learning Organization 44 Basic Model of Strategic Management 46 Environmental Scanning 46 Strategy Formulation 48 Strategy Implementation 52 Evaluation and Control 53 Feedback/Learning Process 54 Initiation of Strategy: Triggering Events 54 Strategic Decision Making 55 What Makes a Decision Strategic? 55 Mintzberg’s Modes of Strategic Decision Making 56 Strategic Decision-Making Process: Aid to Better Decisions 57
  • 16. The Strategic Audit: Aid to Strategic Decision Making 58 End of Chapter Summary 59 APPENDIx 1.A Strategic Audit of a Corporation 64 6 A01_WHEE5488_15_GE_FM.indd 6 7/13/17 4:01 PM C H A P T E R 2 Corporate Governance 72 Role of the Board of Directors 75 Responsibilities of the Board 76 Board of Directors Composition 79 Innovation Issue: JCPENNEY AND INNOVATION 80 Strategy Highlight: AGENCY THEORY VERSUS STEWARDSHIP THEORY IN CORPORATE GOVERNANCE 81 Nomination and Election of Board Members 85 Organization of the Board 86 Impact of Sarbanes–Oxley on U.S. Corporate Governance 87 Global Issue: GLOBAL BUSINESS BOARD ACTIVISM AT YAHOO! 88 Improving Governance 89
  • 17. Evaluating Governance 89 Avoiding Governance Improvements 90 Trends in Corporate Governance 90 The Role of Top Management 91 Responsibilities of Top Management 92 Sustainability Issue: CEO PAY AND CORPORATE PERFORMANCE 92 End of Chapter Summary 95 C H A P T E R 3 Social Responsibility and Ethics in Strategic Management 102 Social Responsibilities of Strategic Decision Makers 104 Responsibilities of a Business Firm 104 Sustainability 107 Sustainability Issue: MARkS & SPENCER LEADS THE WAY 108 Corporate Stakeholders 108 Stakeholder Analysis 109 Strategy Highlight: JOHNSON & JOHNSON CREDO 111 Ethical Decision Making 111 Some Reasons for Unethical Behavior 112
  • 18. Global Issue: HOW RULE-BASED AND RELATIONSHIP- BASED GOVERNANCE SYSTEMS AFFECT ETHICAL BEHAVIOR 113 Innovation Issue: TURNING A NEED INTO A BUSINESS TO SOLVE THE NEED 115 Encouraging Ethical Behavior 116 Views on Ethical Behavior 117 End of Chapter Summary 119 CONTENTS 7 A01_WHEE5488_15_GE_FM.indd 7 7/13/17 4:01 PM PART TWO Scanning the Environment 123 C H A P T E R 4 Environmental Scanning and Industry Analysis 124 Aspects of Environmental Scanning 126 Identifying External Environmental Variables 127 Sustainability Issue: GREEN SUPERCARS 128 Strategic Importance of the External Environment 129 Scanning the Societal Environment: Steep Analysis 129 Global Issue: SUVS POWER ON IN CHINA 137 Identifying External Strategic Factors 139
  • 19. Industry Analysis: Analyzing the Task Environment 139 Porter’s Approach to Industry Analysis 140 Industry Evolution 144 Categorizing International Industries 144 Innovation Issue: TAkING STOCk OF AN OBSESSION 145 International Risk Assessment 146 Strategic Groups 146 Strategic Types 147 Hypercompetition 148 Using Key Success Factors to Create an Industry Matrix 149 Competitive Intelligence 150 Sources of Competitive Intelligence 151 Strategy Highlight EVALUATING COMPETITIVE INTELLIGENCE 152 Monitoring Competitors for Strategic Planning 153 Forecasting 154 Danger of Assumptions 154 Useful Forecasting Techniques 154
  • 20. The Strategic Audit: A Checklist for Environmental Scanning 156 Synthesis of External Factors 156 End of Chapter Summary 158 C H A P T E R 5 Organizational Analysis and Competitive Advantage 164 A Resource-Based Approach to Organizational Analysis—Vrio 166 Core and Distinctive Competencies 166 Using Resources/Capabilities to Gain Competitive Advantage 169 8 CONTENTS A01_WHEE5488_15_GE_FM.indd 8 7/13/17 4:01 PM Business Models 170 Value-Chain Analysis 172 Industry Value-Chain Analysis 172 Corporate Value-Chain Analysis 174 Scanning Functional Resources and Capabilities 175 Basic Organizational Structures 175 Culture 177
  • 21. Global Issue: MANAGING CORPORATE CULTURE FOR GLOBAL COMPETITIVE ADVANTAGE: ABB VS. PANASONIC 179 Strategic Marketing Issues 179 Innovation Issue: DOCOMO MOVES AGAINST THE GRAIN 181 Strategic Financial Issues 182 Strategic Research and Development (R&D) Issues 183 Strategic Operations Issues 185 Strategic Human Resource Management (HRM) Issues 187 Strategic Information Systems/Technology Issues 189 Sustainability Issue: THE OLYMPIC GAMES—LONDON 2012/SOCHI 2014/RIO 2016 & TOkYO 2020 190 The Strategic Audit: A Checklist for Organizational Analysis 192 Synthesis of Internal Factors (IFAS) 192 End of Chapter Summary 194 PART THREE Strategy Formulation 199 C H A P T E R 6 Strategy Formulation: Business Strategy 200 A Framework for Examining Business Strategy 202
  • 22. Generating a Strategic Factors Analysis Summary (SFAS) Matrix 203 Finding Market Niches 205 Mission and Objectives 206 Business Strategies 207 Porter’s Competitive Strategies 207 Global Issue: HAS EMIRATES REACHED THE LIMIT OF GLOBALIZATION? 209 Innovation Issue: CHEGG AND COLLEGE TExTBOOkS 212 Sustainability Issue: STRATEGIC SUSTAINABILITY—ESPN 214 Cooperative Strategies 215 Strategic Alliances 216 End of Chapter Summary 220 CONTENTS 9 A01_WHEE5488_15_GE_FM.indd 9 7/13/17 4:01 PM C H A P T E R 7 Strategy Formulation: Corporate Strategy 224 Corporate Strategy 226 Directional Strategy 226
  • 23. Growth Strategies 227 Strategy Highlight: TRANSACTION COST ECONOMICS ANALYZES VERTICAL Growth StrateGy 230 Global Issue: GLOBAL ExPANSION IS NOT ALWAYS A PATH TO GROWTH 232 Controversies in Directional Growth Strategies 233 Stability Strategies 234 Retrenchment Strategies 235 Portfolio Analysis 237 BCG Growth-Share Matrix 238 Sustainability Issue: GENERAL MOTORS AND THE ELECTRIC CAR 240 Advantages and Limitations of Portfolio Analysis 241 Managing a Strategic Alliance Portfolio 241 Corporate Parenting 242 Innovation Issue: TO RED HAT OR NOT? 243 Developing a Corporate Parenting Strategy 244 Horizontal Strategy and Multipoint Competition 244 End of Chapter Summary 245
  • 24. C H A P T E R 8 Strategy Formulation: Functional Strategy and Strategic Choice 250 Functional Strategy 252 Marketing Strategy 252 Financial Strategy 254 Research and Development (R&D) Strategy 255 Operations Strategy 256 Global Issue: WHY IS STARBUCkS AFRAID OF ITALY? 257 Purchasing Strategy 258 Sustainability Issue: HOW HOT IS HOT? 259 Innovation Issue: WHEN AN INNOVATION FAILS TO LIVE UP TO ExPECTATIONS 260 Logistics Strategy 261 Human Resource Management (HRM) Strategy 261 Information Technology Strategy 262 10 CONTENTS A01_WHEE5488_15_GE_FM.indd 10 7/13/17 4:01 PM The Sourcing Decision: Location of Functions 262 Strategies To Avoid 265
  • 25. Strategic Choice: Constructing Scenarios 265 Constructing Corporate Scenarios 266 The Process of Strategic Choice 271 Using Policies to Guide Strategic Choices 273 End of Chapter Summary 273 PART FOUR Strategy Implementation and Control 279 C H A P T E R 9 Strategy Implementation: Global Strategy 280 International Entry 282 International Coordination 284 International Strategic Alliances 285 Stages of International Development 285 International Employment 286 Measurement of Performance 288 End of Chapter Summary 290 C H A P T E R 1 0 Strategy Implementation: Organizing and Structure 294 Strategy Implementation 296 Who Implements Strategy? 297 What Must Be Done? 297
  • 26. Developing Programs, Budgets, and Procedures 297 Sustainability Issue: A BETTER BOTTLE—ECOLOGIC BRANDS 298 Achieving Synergy 302 How Is Strategy To Be Implemented? Organizing for Action 303 Structure Follows Strategy 303 Stages of Corporate Development 304 Innovation Issue: THE P&G INNOVATION MACHINE STUMBLES 305 Organizational Life Cycle 309 Flexible Types of Organizational Structure 310 The Matrix Structure 310 Network Structure—The Virtual Organization 312 Global Issue: OUTSOURCING COMES FULL CIRCLE 313 Cellular/Modular Organization: A New Type of Structure? 314 CONTENTS 11 A01_WHEE5488_15_GE_FM.indd 11 7/13/17 4:01 PM Reengineering and Strategy Implementation 314
  • 27. Six Sigma 315 Designing Jobs to Implement Strategy 316 Centralization Versus Decentralization 317 End of Chapter Summary 318 C H A P T E R 1 1 Strategy Implementation: Staffing and Directing 324 Staffing 326 Staffing Follows Strategy 327 Selection and Management Development 329 Innovation Issue: HOW TO kEEP APPLE “COOL” 329 Problems in Retrenchment 331 Leading 333 Managing Corporate Culture 333 Sustainability Issue: PANERA AND THE “PANERA CARES COMMUNITY CAFé” 334 Action Planning 338 Management by Objectives 340 Total Quality Management 341 Global Issue: CULTURAL DIFFERENCES CREATE IMPLEMENTATION PROBLEMS
  • 28. in MerGer 342 End of Chapter Summary 342 C H A P T E R 1 2 Evaluation and Control 348 Measuring Performance 350 Appropriate Measures 350 Types of Controls 351 Innovation Issue: SOLAR POWER AND THE GRID 352 Activity-Based Costing 353 Enterprise Risk Management 354 Primary Measures of Corporate Performance 354 Sustainability Issue: THE END OF THE CASH REGISTER RECEIPT 357 Balanced Scorecard Approach: Using Key Performance Measures 358 Primary Measures of Divisional and Functional Performance 360 Responsibility Centers 360 Using Benchmarking To Evaluate Performance 362 12 CONTENTS A01_WHEE5488_15_GE_FM.indd 12 7/13/17 4:01 PM
  • 29. Global Issue: Counterfeit Goods And PirAted softwAre: A GlobAl Problem 363 Strategic Information Systems 363 Enterprise Resource Planning 364 Radio Frequency Identification and Near Field Communication 364 Divisional and Functional is Support 365 Problems in Measuring Performance 365 Short-Term Orientation 366 Goal Displacement 367 Guidelines for Proper Control 368 Aligning Incentives 369 End of Chapter Summary 371 PArt fiVe Introduction to Case Analysis 377 C h A P t e r 1 3 Suggestions for Case Analysis 378 The Case Method 380 Researching the Case Situation 380 Financial Analysis: A Place to Begin 381
  • 30. Analyzing Financial Statements 381 Common-Size Statements 385 Z-Value and the Index of Sustainable Growth 385 Useful Economic Measures 386 Format for Case Analysis: The Strategic Audit 386 End of Chapter Summary 389 APPendix 13.A Resources for Case Research 391 APPendix 13.b Suggested Case Analysis Methodology Using the Strategic Audit 393 APPendix 13.C Example of Student-Written Strategic Audit 396 PArt six Cases in Strategic Management 1-1 s e C t i o n A Executive Leadership CAse 1 The Recalcitrant Director at Byte Products, Inc.: Corporate Legality versus Corporate Responsibility 1-7 (Contributors: Dan R. Dalton, Richard A. Cosier, and Cathy A. Enz) A plant location decision forces a confrontation between the board of directors and the CEO regarding an issue in social responsibility and ethics. Contents 13 A01_WHEE5488_15_GE_FM.indd 13 7/20/17 7:27 PM
  • 31. CASE 2 The Wallace Group 2-1 (Contributor: Laurence J. Stybel) Managers question the company’s strategic direction and how it is being managed by its founder and CEO. Company growth has resulted not only in disorganization and confusion among employees, but in poor overall performance. How should the board deal with the company’s founder? S E C T I O N B Business Ethics CASE 3 Everyone Does It 3-1 (Contributors: Steven M. Cox and Shawana P. Johnson) When Jim Willis, Marketing VP, learns that the launch date for the company’s new satellite will be late by at least a year, he is told by the company’s president to continue using the earlier published date for the launch. When Jim protests that the use of an incorrect date to market contracts is unethical, he is told that spacecraft are never launched on time and that it is common industry practice to list unrealistic launch dates. If a realistic date was used, no one would contract with the company. CASE 4 The Audit 4-1 (Contributors: Gamewell D. Gantt, George A. Johnson, and John A. Kilpatrick) A questionable accounting practice by the company being audited puts a new CPA in a difficult position. Although the practice is clearly wrong, she is being pressured by her manager to ignore it because it is common in the industry.
  • 32. S E C T I O N C Corporate Governance and Social Responsibility CASE 5 Early Warning or False Sense of Security? Concussion Risk and the Case of the Impact-Sensing Football Chinstrap 5-1 (Contributors: Clifton D. Petty, and Michael R. Shirley) In 2009, Battle Sports Science, headquartered in Omaha, Nebraska, was built with a focus on “enhancing safety for athletes.” Specifically, the company wanted to protect young athletes who might have suffered a concussion. Battle Sports Science attempted to gain market attention for its US$149.99 impact indicator (chin strap) through endorsements, and had enlisted a number of NFL players. The company hoped to sell the device to sports programs (schools) as well as to individual players. CASE 6 The Storm of Governance Reform at the American Red Cross 6-1 (Contributors: Jill A. Brown and Anne Anderson) In early 2006, a U.S. Senate Finance Committee began investigating the American Red Cross following substantial concerns over the governance effectiveness of the organization and its Board of Governors. This investigation was prompted by concerns over Hurricane Katrina relief efforts, as well as governance concerns regarding the structure and processes of the ARC Board. Consequently, the Finance Committee appointed an Independent Governance Advisory Panel to provide recommendations regarding how to overhaul the American Red Cross Board of Governors.
  • 33. CASE 7 Chipotle Mexican Grill, Inc.: Conscious Capitalism by Serving “Food With Integrity” 7-1 (Contributor: Alan N. Hoffman) People loved Chipotle Mexican Grill because of the tasty and healthy food as well as its edgy, trendy, cool brand image. Chipotle established itself as a successful company practicing “conscious capitalism” by serving “food with integrity”—its supply chain and corporate culture were closely integrated from the time that ingredients were farmed, raised, harvested, and shipped to stores to the time the final product was placed on a customer’s serving tray. By 2014, the fast new new 14 CONTENTS A01_WHEE5488_15_GE_FM.indd 14 7/13/17 4:01 PM casual food market in the US became increasingly competitive and crowded with many new entrants. Being a public listed company, Chipotle had to meet Wall Street’s high expectations of growth and earnings. Living up to analysts’ expectations was becoming increasingly difficult for Chiptole. S E C T I O N D Privacy CASE 8 Google and the Right to Be Forgotten 8-1
  • 34. (Contributor: Cynthia E. Clark) In 2009, Mario Costeja Gonzalez, a self-employed attorney casually “googled” himself and was startled by what came up on his computer screen. Prominently displayed in the search results was a brief legal notice that had appeared more than a decade earlier in a local newspaper, which listed property seized and being auctioned by a government agency for nonpayments of debts. Costeja immediately realized that this information could damage his reputation as an attorney and decided to fight Google to request deletion of that data. S E C T I O N E International Issues in Strategic Management CASE 9 Harley Davidson: An Overreliance on Aging Baby Boomers 9-1 (Contributors: Alan N. Hoffman and Natalia Gold) At Harley Davidson, customers not only purchased a motorcycle, they bought the “rebel” lifestyle Harley signified. This rebel image took a long time to develop and constituted a major competitive advantage for Harley. Nothing promised the same excitement as being on the open road on a Harley, its engine roaring, the wind whipping, the great open spaces of America just down the road. Harley Davidson specifically targeted a narrowly defined market of middle-aged males with disposable income. However, as US baby boomers got older, the company recognized that it had to look to new markets and demographics to expand sales. CASE 10 Uber: Feeling the Heat from Competitors and Regulators Worldwide 10-1 (Contributors: Alan N. Hoffman and Natalia Gold) Uber, originally known as “UberCab,” was started by Travis
  • 35. Kalanick and Garrett Camp in San Francisco, California, in 2009. The company grew rapidly and by 2015 it was providing carpooling services in 300 major cities in 58 countries around the world. As Uber moved forward into new territories, however, it got entangled in many regulatory and legal hassles. The company had to figure out how to sustain its lead in the heavily regulated, controversial, competitive, and ever-changing taxi industry. Moreover, despite a landslide market share Uber was operating at a loss. How to lower costs and become profitable was another challenge for this young and aggressive company. S E C T I O N F General Issues in Strategic Management I N D U S T R Y O N E : INTERNET COMPANIES CASE 11 Pandora Internet Radio (2014): Just Press Play 11-1 (Contributors: Gary Stenftennagel and Joyce Vincelette) Pandora Media was built around the idea of providing listeners with only the music that they love. To do so, Pandora fundamentally changed how people listened to music by allowing station customization and the ability to listen to music over the Internet. As technology changed, Pandora evolved from a Web site based radio provider and developed a mobile application where the company could offer its services to customers whenever and wherever they wanted to listen to music. Monetizing the mobile product proved to be difficult and Pandora had not yet attained profitability. new
  • 36. new new new CONTENTS 15 A01_WHEE5488_15_GE_FM.indd 15 7/13/17 4:01 PM CASE 1 2 Amazon.com, Inc.: Retailing Giant to High-Tech Player? 12-1 (Contributor: Alan N. Hoffman) In 2012, more than half of all Amazon sales came from computers, mobile devices including the Kindle, Kindle Fire, and Kindle Touch, and other electronics, as well as general merchandise from home and garden supplies to groceries, apparel, jewelry, health and beauty products, sports and outdoor equipment, tools, and auto and industrial supplies. Amazon was at a crossroads with regard to its push into technology versus its general merchandise. Amazon also faced other challenges, including those from state governments that wanted it to collect sales taxes so it would not adversely compete against local businesses. CASE 1 3 Blue Nile, Inc.: “Stuck in the Middle” of the Diamond Engagement Ring Market 13-1 (Contributor: Alan N. Hoffman) Blue Nile Inc. has developed into the largest online retailer of
  • 37. diamond engagement rings. Unlike traditional jewelry retailers, Blue Nile operates completely store-front-free, without in-person consultation services. The business conducts all sales online or by phone, and sales include both engagement (70%) and non-engagement (30%) categories. Blue Nile’s vision is to educate its customer base so customers can make an informed, confident decision no matter what event they are celebrating. It wants to make the entire diamond-buying process easy and hassle-free. I N D U S T R Y T W O : ENTERTAINMENT AND LEISURE CASE 1 4 Groupon Inc.: Daily Deal or Lasting Success? 14-1 (Contributors: Nick Falcone, Eric Halbruner, Ellie A. Fogarty, and Joyce Vincelette) Groupon began as a local Chicago discount service and became a global phenomenon seemingly overnight. It was a great idea. The company was the first of its kind and changed the way consumers spend, shop, and think about discounts. But how could Groupon, based on such innovation and having experienced such exceptional growth, be in such a precarious position? A wave of competition had swelled, including the likes of technology giants and both general and niche daily deals services, all replicating Groupon’s business model. How could Groupon compete against large companies and their expansive resources? CASE 1 5 Netflix Inc.: The 2011 Rebranding/Price Increase Debacle 15-1 (Contributor: Alan N. Hoffman) On September 18, 2011, Netflix CEO and co-founder Reed Hastings announced on the Netflix
  • 38. blog that the company was splitting its DVD delivery service from its online streaming service, rebranding its DVD delivery service, Qwikster, as a way to differentiate it from its online streaming service, and creating a new Web site for it. Three weeks later, in response to customer outrage and confusion, Hastings rescinded the decision to rebrand the DVD delivery service, Qwikster, and reintegrated it into Netflix. Nevertheless, only five weeks after the initial split, Netflix acknowledged that it had lost 800,000 U.S. subscribers and expected to lose many more, thanks both to the Qwikster debacle and the price hike the company had decided was necessary to cover increasing content costs. CASE 1 6 Town Sports International Holdings, Inc.: Unsquashable 16-1 (Contributors: Sarah Stefanelli, Christina Marie Kopka, Jakub Libucha, and Joyce Vincelette) Town Sports International decided to move forward with its expansion strategy in order to become the most recognized health club network, through both designing and building clubs and through selective acquisitions within its four major markets, Boston, New York, Washington D.C., and Philadelphia. Town Sports Int’l set out to accomplish this efficiently and effectively by living by its customer-centric mission, “Improving Lives Through Exercise.” new 16 CONTENTS
  • 39. A01_WHEE5488_15_GE_FM.indd 16 7/13/17 4:01 PM CASE 1 7 Zynga, Inc. (2011): Whose Turn Is It? 17-1 (Contributors: Zachary Burkhalter, Daniel Zuller, Concetta Bagnato, Joyce Vincelette, and Ellie A. Fogarty) Zynga built its company around social gaming. This new type of gaming transformed the gaming industry on multiple levels and across various platforms. Zynga originally built its games using the Facebook platform and then capitalized on the company’s unique method of social networking to capture audiences around the world. However, this strong reliance on Facebook and changes in consumer gaming practices caused some concern among outside investors as to the future of Zynga. INDUSTRY THREE: FOOD AND BEVERAGE CASE 1 8 The Boston Beer Company: Brewers of Samuel Adams Boston Lager (Mini Case) 18-1 (Contributor: Alan N. Hoffman) The Boston Beer Company, founded in 1984 by Jim Koch, is viewed as a pioneer in the American craft beer revolution. Brewing over one million barrels of 25 different styles of beer, Boston Beer is the sixth-largest brewer in the United States. Even though overall domestic beer sales declined 1.2% in 2010, sales of craft beer have increased 20% since 2002, with Boston Beer’s increasing 22% from 2007 to 2009. How can the company continue its rapid growth in a mature industry?
  • 40. CASE 1 9 Panera Bread Company (2010): Still Rising Fortunes? 19-1 (Contributors: Joyce P. Vincelette and Ellie A. Fogarty) Panera Bread is a successful bakery-café known for its quality soups and sandwiches. Even though Panera’s revenues and net earnings have been rising rapidly, new unit expansion throughout North America has fueled this growth. Will revenue growth stop once expansion slows? The retirement of CEO Ronald Shaich, the master baker who created the “starter” for the company’s phenomenal growth, is an opportunity to rethink Panera’s growth strategy. CASE 2 0 Whole Foods Market (2010): How to Grow in an Increasingly Competitive Market? (Mini Case) 20-1 (Contributors: Patricia Harasta and Alan N. Hoffman) Whole Foods Market is the world’s leading retailer of natural and organic foods. The company differentiates itself from competitors by focusing on innovation, quality, and service excellence, allowing it to charge premium prices. Although the company dominates the natural/organic foods category in North America, it is facing increasing competition from larger food retailers like Wal-Mart, who are adding natural/organic foods to their offerings. CASE 2 1 Burger King (Mini Case) 21-1 (Contributor: J. David Hunger) Founded in Florida in 1953, Burger King has always trailed behind McDonald’s as the second- largest fast-food hamburger chain in the world. Although its total revenues dropped only slightly
  • 41. from 2009, its 2010 profits dropped significantly, due to high expenses. Burger King’s purchase by an investment group in 2010 was an opportunity to rethink the firm’s strategy. CASE 2 2 Sonic Restaurants: Does Its Drive-In Business Model Limit Future Growth Potential? 22-1 (Contributors: Alan N. Hoffman and Natalia Gold) Sonic is an iconic American drive-in fast-food chain with nearly thousands of franchises established across the United States by 2014. As Sonic continued to expand, it ran into various hurdles. The most daunting challenge was to enter urban environments where space was too scarce to make drive-in possible. At the same time, while the drive-in model was highly effective in the US, thanks to nostalgia, it did not have the same emotional appeal to international new CONTENTS 17 A01_WHEE5488_15_GE_FM.indd 17 7/13/17 4:01 PM consumers. Should Sonic move away from the drive-in model and reinvent itself? If so, would it become just another fast food burger joint with a customizable menu? And how could it compete with larger players such as McDonald’s and Burger King that already had a substantial urban and international presence?
  • 42. CASE 2 3 “Breaking Up is Hard to Do”: PepsiCo in 2014 23-1 (Contributor: Ram Subramanian) On April 17, 2014, Indra Nooyi, the Chief Executive Officer of the Purchase, New York-based PepsiCo, a diversified beverage and snack foods company, met with Ian Cook, the Presiding Director of the company’s Board, to discuss a response to Nelson Peltz’s (the head of Trian Fund Management, an activist fund) latest call for breaking up the company into two independent entities. Peltz had threatened to approach the company’s stockholders directly if the Board did not accede to his demands. INDUSTRY FOUR: APPAREL CASE 2 4 Under Armour 24-1 (Contributors: Ram Subramanian and Pradeep Gopalakrishna) Under Armour’s footwear sales declined by 4.5% during the second quarter of 2009 and showed a 16.6% decline in the first six months of 2010 compared to 2009. This was in contrast to its performance apparel, the company’s core category, which saw a 32.2% uptick over 2009. Under Armour had tremendous growth opportunities in the apparel category in China. However, CEO Kevin Plank wanted Under Armour to be a leading player in the field of athletic footwear. CASE 2 5 TOMS Shoes (Mini Case) 25-1 (Contributor: J. David Hunger) Founded in 2006 by Blake Mycoskie, TOMS Shoes is an American footwear company based in Santa Monica, California. Although TOMS Shoes is a for-profit business, its mission is more
  • 43. like that of a not-for-profit organization. The firm’s reason for existence is to donate to children in need one new pair of shoes for every pair of shoes sold. By 2010, the company had sold over one million pairs of shoes. How should the company plan its future growth? CASE 2 6 J.C. Penney Company, Inc.: Surviving the Ron Johnson (CEO) Era 26-1 (Contributor: Alan N. Hoffman) Ron Johnson, the architect behind Apple’s wildly successful retail stores and 15-year Target veteran, became American department store chain J.C. Penney’s new CEO in November 2011. The owner of J.C. Penney had high hopes for Johnson, who proceeded to make drastic changes to the company including a new logo and a new spokesperson (Ellen DeGeneres). His vision included transforming 700 of the largest J.C. Penney stores into collections of some 100 branded shops with a central ”town square” gathering area for services. J.C. Penney fired Ron Johnson after just 17 months, following a disastrous decline in business directly attributable to the failure of the new business plan. INDUSTRY FIVE: RETAILING CASE 2 7 Best Buy Co. Inc. (2009): A Sustainable Customer- Centricity Model? 27-1 (Contributor: Alan N. Hoffman) Best Buy, the largest consumer electronics retailer in the United States, operates 4000 stores in North America, China, and Turkey. It distinguishes itself from competitors by deploying a
  • 44. differentiation strategy based on superior service rather than low price. The recent recession has stressed its finances and the quality of its customer service. How can Best Buy continue to have innovative products, top-notch employees, and superior customer service while facing increased competition, operational costs, and financial stress? new new 18 CONTENTS A01_WHEE5488_15_GE_FM.indd 18 7/13/17 4:01 PM CASE 2 8 Target Corp’s Tarnished Reputation: Failure in Canada and a Massive Data Breach 28-1 (Contributors: Alan N. Hoffman and Natalia Gold) Target is a US mass-market discount store catering to shoppers seeking high quality products. In a crowded market, Target was eager to grow its business outside the US and online. It expanded to Canada in 2011 by acquiring a failed retailer. A move that seemed prudent actually saddled Target with inconveniently located stores and strained its logistics infrastructure. Closing down its Canadian stores, Target focused on strengthening its online presence. But two massive data breach incidents in 2013 and 2014 affected over 100 million of its customers and weakened Target’s sales significantly. In order to keep its market share on a par with competitors such as
  • 45. Walmart and Amazon, Target clearly has challenges to be met. CASE 2 9 Staples: The Fierce Battle Between Brick and Mortar vs. Online Sales 29-1 (Contributors: Alan N. Hoffman and Natalia Gold) With a focus on convenience and a wide range of product offerings, Staples was the world’s largest office supplies retailer. The office supply sector had almost no barriers to entry as capital costs were low compared to other retail industries. No licensing requirements were necessary, easing the burden on new entrants. The low level of differentiation of goods between one office supply store and the next, forced new entrants to provide either niche or specialty products to compete and often in the online realm. As the retail industry had been trending towards e-commerce, Staples’ traditional brick and mortar stores were costing it dearly. The global office supplies leader found it increasingly difficult to compete on the Internet. INDUSTRY SIx: TRANSPORTATION CASE 3 0 Tesla Motors, Inc.: The First U.S. Car Company IPO Since 1956 30-1 (Contributor: Alan N. Hoffman) Tesla Motors was founded in 2004 to produce electric automobiles. Its first car, the Tesla Roadster, sold for US$101,000. It could accelerate from 0 to 60 mph in 3.9 seconds, and cruise for 236 miles on a single charge. In contrast to existing automakers, Tesla sold and serviced its cars through the Internet and its own Tesla stores. With the goal of building a full line of electric vehicles, Tesla Motors faces increasing competition from
  • 46. established automakers. How can Tesla Motors succeed in an industry dominated by giant global competitors? CASE 3 1 TomTom: New Competition Everywhere! 31-1 (Contributor: Alan N. Hoffman) TomTom, an Amsterdam-based company that provides navigation services and devices, led the navigation systems market in Europe and is second in popularity in the United States. However, the company is facing increasing competition from other platforms using GPS technology, like cell phones and Smartphones with built-in navigation functions. As its primary markets in the United States and Europe mature, how can the company ensure its future growth and success? INDUSTRY SEVEN: MANUFACTURING CASE 3 2 General Electric, GE Capital, and the Financial Crisis of 2008: The Best of the Worst in the Financial Sector? 32-1 (Contributor: Alan N. Hoffman) The financial services industry was, by definition, volatile, and GE Capital was particularly hard hit by the economic recession of 2008. With the credit markets illiquid and financial markets falling, GE Capital found it was overexposed to commercial real estate and foreign residential mortgages. At this point, GE’s parent corporation stepped in, began reorganizing GE Capital, and significantly downsized the unit. GE Capital hoped to see continued sustainable earnings growth with growing margins and lower portfolio risk, and to return money to investors and resume paying dividends to its parent company.
  • 47. new new CONTENTS 19 A01_WHEE5488_15_GE_FM.indd 19 7/13/17 4:01 PM CASE 3 3 Snap-on Tools: A Victim of Its Own Success 33-1 (Contributor: Alan N. Hoffman) For 93 years, Snap-on Tools had firmly established itself as an innovative premium tool manufacturer serving the automotive industry. In recent years, Snap-on Tools started to expand its product lines to engineering industries including aerospace, aviation, and oil and gas. It also began to give technical education to build the skilled labor base in the US—its largest market that constituted 65% of all revenue. Snap-on feared that its overdependence on the US market could make its business and operations vulnerable to country-specific trends as well as increase the company’s exposure to local factors such as severe weather conditions, labor strikes, or changes in regulations. GLOSSARY G-1 NAME INDEx I-1 SUBJECT INDEx I-6 new
  • 48. 20 CONTENTS A01_WHEE5488_15_GE_FM.indd 20 7/13/17 4:01 PM Preface Welcome to the 15th edition of Strategic Management and Business Policy! All of the chapters have been updated and we have added one new chapter on Global Strategy. In addition, we have added 13 brand-new cases (Target, American Red Cross, Sonic Restaurants, Harley Davidson, Staples, Chipotle, Uber, Pandora Internet Radio, Snap-on Tools, Google, Pepsi, Town Sports International, and JC Penney). Many of the cases are exclusive to this edition! Although we still make a distinction between full-length and mini cases, we have interwoven them throughout the book to better identify them with their industries. The theme that runs throughout all 13 chapters of this edition continues our view from the 14th edition that there are three strategic issues that comprise the corner- stone all organizations must build upon to push their businesses forward. Those are globalization, innovation, and sustainability. Each chapter incorporates specific vignettes about these three themes. We strive to be the most comprehensive and prac- tical strategy book on the market, with chapters ranging from
  • 49. corporate governance and social responsibility to competitive strategy, functional strategy, and strategic alliances. FEATURES NEW TO THIS 15TH EDITION This edition of the text has: ■■ A completely new Chapter (9) on Global Strategy. While we discuss globalization in every chapter of the book, including a Global Issues section in each chapter, we have called out a stand-alone chapter to address the key issues of entry, inter- national coordination, stages of international development, international employ- ment, and measurement of performance. ■■ New and updated vignettes on sustainability (which is widely defined as business sustainability), globalization (which we view as an expectation of business), and innovation (which is the single most important element in achieving competitive advantage) appear in every chapter of the text. ■■ Every example, chapter opening, and story has been updated. This includes chap- ter opening vignettes examining companies such as: Tesla, Pizza Hut, UNIQLO, Kärcher, Purbani Group, and United Airlines among many others. ■■ Resource-based analysis and more specifically the VRIO framework (Chapter 5) has been added to the toolbox of students’ understanding of
  • 50. core competencies and competitive advantage with a significant addition of material and a practical example. 21 A01_WHEE5488_15_GE_FM.indd 21 7/13/17 4:01 PM ■■ Extensive additions have been made to the text from both strategy research and practical experience. ■■ Thirteen new comprehensive cases have been added to support the 14 popular full- length cases and 6 mini-cases carried forward from past editions. Of the 33 cases appearing in this book, 19 are exclusive and do not appear in other books. ■■ One of the new cases deals with privacy (Google and the Right to Be Forgotten). ■■ One of the new cases deals with governance (American Red Cross). ■■ One of the new cases deals with conscious capitalism (Chipotle). ■■ Two of the new cases deal with international issues (Uber, Harley Davidson). ■■ One of the new cases involves Internet companies (Pandora Internet Radio). ■■ One of the new cases deals with Sports and Leisure (Town Sports Int’l). ■■ One of the new cases deals with Apparel (J.C. Penney). ■■ Three of the new cases deal with Food and Beverages
  • 51. (Pepsi, Sonic Restaurants). ■■ Two of the new cases deal with Retailing (Target, Staples). ■■ One of the new cases deals with Manufacturing (Snap-on Tools). HOW THIS BOOk IS DIFFERENT FROM OTHER STRATEGY TExTBOOkS This book contains a Strategic Management Model that runs through the first 12 chap- ters and is made operational through the Strategic Audit, a complete case analysis methodology. The Strategic Audit provides a professional framework for case analysis in terms of external and internal factors and takes the student through the generation of strategic alternatives and implementation programs. To help the student synthesize the many factors in a complex strategy case, we developed three useful techniques: ■■ The External Factor Analysis (EFAS) Table in Chapter 4 ■■ This reduces the external opportunities and threats to the 8 to 10 most important external factors facing management. ■■ The Internal Factor Analysis (IFAS) Table in Chapter 5 ■■ This reduces the internal strengths and weaknesses to the 8 to 10 most important internal factors facing management. ■■ The Strategic Factor Analysis Summary (SFAS) Matrix in Chapter 6 This condenses the 16 to 20 factors generated in the EFAS and IFAS tables into
  • 52. the 8 to 10 most important (strategic) factors facing the company. These strategic factors become the basis for generating alternatives and act as a recommendation for the company’s future direction. Suggestions for case analysis are provided in Appendix 13.B (end of Chapter 13) and contain step-by-step procedures on how to use a strategic audit in analyzing a case. This appendix includes an example of a student-written strategic audit. Thousands of students around the world have applied this methodology to case analysis with great success. The Case Instructor’s Manual contains examples of student-written strategic audits for each of the full-length comprehensive strategy cases. 22 PREFACE A01_WHEE5488_15_GE_FM.indd 22 7/13/17 4:01 PM FEATURES This edition contains many of the same features and content that helped make previ- ous editions successful. Some of the features include the following: ■■ A strategic management model runs throughout the first 12 chapters as a unify- ing concept. (Explained in Chapter 1)
  • 53. ■■ The strategic audit, a way to opera- tionalize the strategic decision- making process, serves as a checklist in case analysis. (Chapter 1) ■■ Corporate governance is examined in terms of the roles, responsibilities, and interactions of top management and the board of directors. (Chapter 2) ■■ Social responsibility and managerial ethics are examined in detail in terms of how they affect strategic decision making. They include the pro- cess of stakeholder analysis and the concept of social capital. (Chapter 3) PREFACE 23 3534 Basic Concepts of Strategic Management C h a p t e r 1 1-5. Describe the basic model of strategic man- agement and its components 1-6. Identify some common triggering events that act as stimuli for strategic change 1-7. Explain strategic decision-making modes 1-8. Use the strategic audit as a method of analyzing corporate functions and activities
  • 54. 1-1. Discuss the benefits of strategic management 1-2. Explain how globalization, innovation, and environmental sustainability influence strategic management 1-3. Discuss the differences between the theo- ries of organizations 1-4. Discuss the Activities where learning orga- nizations excel Learning Objectives After reading this chapter, you should be able to: Toyota Motors Co. In 1937, Kiichiro Toyoda founded the Toyota Motor Corporation, head- quartered in Aichi Prefecture, Japan. The company, now headed by Akio Toyoda, the President and Representative Director, has a capital of around $179,399 million. Its primary business activities involve automotive manu- facturing. As of March 2016, the company employs around 348,977 people. Sakichi Toyoda, the founder of Toyota Industries, set certain Guiding
  • 55. Principles that reflect Toyota’s organizational culture and values, and are the basis for the corporate management philosophy. These were first revised in 1992, and again in 1997, to support its operations in a multicultural environment. They were modified in response to the societal changes and the company’s business structure, which support its global vision, strategies, and operations worldwide. An example of its strategy to keep with the changing times is the Toyota Way 2001, which focuses on CSR and customer orientation, innovative management, and the nurturing of its employees’ creativity and teamwork, mutual trust, and respect between labor and management. At the heart of the Toyota Way are two pillars—continuous improvement and respect for people. These are supported by five values: challenge, continuous improvement (kaizen), seeing for yourself (genchi genbutsu), respect, and teamwork. In 1997, Thailand, a regional hub of Toyota’s auto manufacturing industry in ASEAN, faced an economic crisis resulting from over-investment in real estate and a liberal financing policy. Toyota Motor Thailand Co., Ltd. (TMT) subsequently encountered huge losses. To overcome the crisis
  • 56. various actions were taken—the TMT first requested and received two capital injections, totaling US$200 million, from Toyota Motor Corporation in Japan. However, since the automotive market was down by about 75%, the TMT had to use a job-sharing approach to retain its skilled, but redundant, workforce. Together with this measure, the company observed it’s “no lay-off” policy by sending about 200 idle associates to Japan for training, while others assisted their local dealers. To avoid further losses, TMT focused on 100% localization of parts and took advantage of export opportunities. Undertaking new business reforms, such as online management of vehicle supply and demand and the formation of project teams in finance and marketing, helped boost new vehicle sales. For dealers and suppliers, TMT granted credit lines and short-term loans. Pearson MyLab Management® Improve Your Grade! Over 10 million students improved their results using the Pearson MyLabs. Visit mymanagementlab.com for simulations, tutorials, and end-of-chapter problems. Putting Strategy into Action Developing Long-range Plans
  • 57. Monitoring Performance Feedback/Learning: Make corrections as needed Gathering Information Strategy Implementation: Strategy Formulation: Evaluation and Control: Environmental Scanning: Societal Environment: General forces Natural Environment: Resources and climate Task Environment: Industry analysis Structure:
  • 58. Chain of command Culture: Beliefs, expectations, values Resources: Assets, skills, competencies, knowledge Activities needed to accomplish a plan Cost of the programs Sequence of steps needed to do the job What results to accomplish by when Plan to achieve the mission & objectives Broad guidelines for decision
  • 59. making Mission Internal External Programs and Tactics Budgets Procedures Performance Objectives Strategies Policies Actual results Reason for existence M01B_WHEE5488_15_GE_C01.indd 34-35 7/13/17 3:55 PM Introduction to Strategic Management and Business
  • 60. Policy PA R T1 M01A_WHEE2050_15_SE_P01.indd 1 9/9/16 1:06 PM 46 PART 1 Introduction to Strategic Management and Business Policy Highly involved boards tend to be very active. They take their tasks of moni- toring, evaluating and influencing, and initiating and determining very seriously; they provide advice when necessary and keep management alert. As depicted in Figure 2–1, their heavy involvement in the strategic management process places them in the active participation or even catalyst positions. Although 74% of public cor- porations have periodic board meetings devoted primarily to the review of overall company strategy, the boards may not have had much influence in generating the plan itself.11 The same global survey of directors by McKinsey & Company found that directors devote more time to strategy than any other area. Those boards reporting high influence typically shared a common plan for creating value and had healthy debate about what actions the company should take to create value. Together with top management, these high-influence boards considered global trends and future scenarios and developed plans. In contrast, those boards with low influence tended not to do any of these things.12 Nevertheless, studies indicate
  • 61. that boards are becom- ing increasingly active. These and other studies suggest that most large publicly owned corporations have boards that operate at some point between nominal and active participation. As a board becomes less involved in the affairs of the corporation, it moves farther to the left on the continuum (see Figure 2–1). On the far left are passive phantom or rubber- stamp boards that typically never initiate or determine strategy unless a crisis occurs. In these situations, the CEO who also usually serves as Chairman of the Board (although we see the same situation in active boards), personally nominates all directors and works to keep board members under his or her control by giving them the “mushroom treatment”—throw manure on them and keep them in the dark! Generally, the smaller the corporation, the less active is its board of directors in strategic management.13 In an entrepreneurial venture, for example, the privately held corporation may be 100% owned by the founders—who also manage the company. In this case, there is no need for an active board to protect the interests of the owner- manager shareholders—the interests of the owners and the managers are identical. FIGURE 2–1 Board of Directors’ Continuum DEGREE OF INVOLVEMENT IN STRATEGIC MANAGEMENT
  • 62. Low (Passive) Rubber StampPhantom Never knows what to do, if anything; no degree of involvement. Formally reviews selected issues that o�cers bring to its attention. Involved to a limited degree in the perfor- mance or review of selected key decisions, indicators, or programs of management. Approves, questions, and makes final de- cisions on mis- sion, strategy, policies, and objectives. Has
  • 63. active board committees. Performs fiscal and manage- ment audits. Takes the leading role in establishing and modifying the mission, objectives, strategy, and policies. It has a very active strategy committee. Permits o�cers to make all decisions. It votes as the o�cers recom- mend on action issues. Minimal Review Nominal Participation Active Participation Catalyst High
  • 64. (Active) Low High SOURCE: T. L. Wheelen and J. D. Hunger, “Board of Directors’ Continuum,” Copyright © 1994 by Wheelen and Hunger Associates. Reprinted by permission. M02_WHEE2050_15_SE_C02.indd 46 9/9/16 12:16 PM CHAPTER 3 Social Responsibility and Ethics in Strategic Management 73 a business corporation need profits to survive and grow. “Maximizing profits is like maximizing food.” Thus, contends Byron, maximization of profits cannot be the primary obligation of business.2 As shown in Figure 3–1, Archie Carroll proposed that the managers of business organizations have four responsibilities: economic, legal, ethical, and discretionary.3 1. Economic responsibilities of a business organization’s management are to produce goods and services of value to society so that the firm may repay its creditors and increase the wealth of its shareholders. 2. Legal responsibilities are defined by governments in laws that management is expected to obey. For example, U.S. business firms are required to hire and promote people based on their credentials rather than to discriminate on non-job-related
  • 65. characteristics such as race, gender, or religion. 3. Ethical responsibilities of an organization’s management are to follow the generally held beliefs about behavior in a society. For example, society generally expects firms to work with the employees and the community in planning for layoffs, even though no law may require this. The affected people can get very upset if an organization’s management fails to act according to generally prevailing ethical values. 4. Discretionary responsibilities are the purely voluntary obligations a corpora- tion assumes. Examples are philanthropic contributions, training the hard-core unemployed, and providing day-care centers. The difference between ethical and discretionary responsibilities is that few people expect an organization to fulfill discretionary responsibilities, whereas many expect an organization to fulfill ethi- cal ones.4 Carroll lists these four responsibilities in order of priority. A business firm must first make a profit to satisfy its economic responsibilities. To continue in existence, the firm must follow the laws, thus fulfilling its legal responsibilities. There is evidence that com- panies found guilty of violating laws have lower profits and sales growth after convic- tion.5 On this point, Carroll and Friedman are in agreement. Carroll, however, goes further by arguing that business managers have responsibilities
  • 66. beyond economic and legal ones. Having satisfied the two basic responsibilities, according to Carroll, a firm should look to fulfilling its social responsibilities. Social responsibility, therefore, includes both ethical and discretionary, but not economic and legal, responsibilities. A firm can fulfill its ethical responsibilities by taking actions that society tends to value but has not yet put into law. When ethical responsibilities are satisfied, a firm can focus on discretion- ary responsibilities—purely voluntary actions that society has not yet decided to expect FIGURE 3–1 Responsibilities of Business Discretionary Ethical LegalEconomic Social Responsibilities SOURCE: Suggested by Archie Carroll in A. B. Carroll, “A Three Dimensional Conceptual Model of Corpo- rate Performance,” Academy of Management Review (October 1979), pp. 497–505; A. B. Carroll, “Managing -Ethically with Global Stakeholders: A Present and Future Challenge,” Academy of Management Executive (May 2004), pp. 114–120; and A. B. Carroll, “The Pyramid of
  • 67. Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” Business Horizons (July–August 1991), pp. 39–48. M03_WHEE2050_15_SE_C03.indd 73 9/9/16 12:17 PM A01_WHEE5488_15_GE_FM.indd 23 7/13/17 4:01 PM 280 Strategy Implementation: Global Strategy C H A P T E R 9 Improve Your Grade! Over 10 million students improved their results using the Pearson MyLabs. Visit mymanagementlab.com for simulations, tutorials, and end-of-chapter problems. Societal Environment: General forces Natural Environment: Resources and climate Task Environment:
  • 68. Industry analysis Structure: Chain of command Culture: Beliefs, expectations, values Resources: Assets, skills, competencies, knowledge Activities needed to accomplish a plan Cost of the programs Sequence of steps needed to do the job Reason for existence What results to accomplish by when Plan to
  • 69. achieve the mission & objectives Broad guidelines for decision making RReason ffor Mission NNaturall Structure: WhWhatt l h PlPlan to hi the BroB dad id li A tActi iivitities d d h CCostt of tf thhe SeqSequenuencece f
  • 70. Internal External Programs and Tactics Budgets Procedures Performance Objectives Strategies Policies Actual results Putting Strategy into Action Strategy Implementation: Developing Long-range Plans Strategy Formulation: Monitoring Performance
  • 71. Evaluation and Control: Gathering Information Environmental Scanning: Feedback/Learning: Make corrections as needed 281 9-4. Explain how companies can improve their staffing efforts as they expand beyond their home country 9-5. Discuss the unique issues related to Mea- suring Organizational performance that are presented with the administration of atruly international company 9-1. Describe the means of entry by which an organization can do business in another country 9-2. Explain the elements of International Stra- tegic Alliances that lead to success 9-3. Discuss the stages of International Development Learning Objectives After reading this chapter, you should be able to: U.S. Immigration Policy and Founders of Entrepre-
  • 72. neurial Startups Few issues are as contentious around the world as is immigration and foreign-born workers. The whole conversation gets more confused in the United States when foreign-born students of U.S. colleges and uni- versities start-up new companies. There are no visas specifically designed for foreign-born students who start up their own companies. The focus of most visa efforts revolves around the H-1B for ‘skilled’ foreign workers. There is a lottery each year for the 65,000 slots and the additional 20,000 slots for graduates with advanced degrees. All of these slots presume that the person receiving the visa is an employee who works for an established U.S. company. The founder of a new firm might not be receiving compensation early on and even if he or she is paid, they are not employees but owners. According to the Kauffman Foundation while 13% of U.S. population is foreign-born, they make up 24% of the tech and engineering companies formed and a whopping 44% of those formed in the Silicon Valley.
  • 73. These entrepreneurs have a long visa battle ahead of them to be able to stay in the United States with their new companies. They generally apply for a so-called ‘rock star’ visa (Justin Beiberand other artists have one). Among the founders that failed to secure this visa and left the country was WhatsApp CEO Jan Koum, Snapdeal founder Kunal Bahl, and Instagram’s technical lead Mike Krieger. Bahl graduated from Wharton and has now built a business valued at over US$5 Billion with more than 4,000 employees in India. Addressing how to operate a global company involves a number of difficult operating decisions that includes the staffing of the company and how foreign-born workers are treated. SOURCES: “No Country for Startup Founders,” Bloomberg BusinessWeek, February 15–21, 2016, pp. 27–28 D. Stangler& J. Wiens, “The Economic Case for Welcoming Immigrant Entrepreneurs,” EwingMarion Kauffman Foundation, September 8, 2015 (http://www.kauffman.org/what-we- do/resources/entrepreneurship-policy-digest/the-economic-case- for-welcoming -immigrant-entrepreneurs); L. Robbins, “New U.S. Rule Extends Stay for Some Foreign Graduates,” New York Times, March 9, 2016 (http://www.nytimes.com/2016/03/09/nyregion/new-us-rule- extends-stay-for-some-foreign-graduates .html?_r=0).
  • 74. Pearson MyLab Management® ■■ Equal emphasis is placed on environmental scanning of the societal environment as well as on the task environment. Topics include fore- casting and Miles and Snow’s typology in addi- tion to competitive intelligence techniques and Porter’s industry analysis. (Chapter 4) ■■ Core and distinctive competencies are exam- ined within the framework of the resource- based view of the firm and utilizing the VRIO framework. (Chapter 5) ■■ Organizational analysis includes material on business models, supply chain management, and corporate reputation. (Chapter 5) ■■ Internal and external strategic factors are em- phasized through the use of specially designed EFAS, IFAS, and SFAS tables. (Chapters 4, 5, and 6) ■■ Functional strategies are examined in light of outsourcing. (Chapter 8) ■■ Three chapters deal with issues in strategy implementation, such as organizational and job design, as well as strategy-manager fit, action planning, and corporate culture. In addition we address Global Strategy as a unique im- plementation issue. (Chapters 9, 10 and 11)
  • 75. ■■ A separate chapter on evaluation and control explains the impor- tance of measure- ment and incentives to organizational p e r f o r m a n c e . (Chapter 12) ■■ Suggestions for in-depth case analysis provide a complete listing of financial ratios, recommendations for oral and written analysis, and ideas for further research. (Chapter 13) 24 PREFACE 134 PART 2 Scanning the Environment Pierre Beaudoin stepped down in 2015 as the company continued to spiral down- ward. The C-Series has yet to make any real penetration in the market with orders of less than 250 planes (and none in the past 1½ years) as of 12/31/15 compared to 3,072 orders for Boeing’s 737 and 4,471 for Airbus’s 320. As the investment of billions in the program was underway, the company decided to launch two new business jets further stretching resources.
  • 76. The company has invested over $5 billion in the C-Series alone and has had a net negative cash burn for the past five years. The stock is now worth one- tenth of what it was in 2011 and the company is asking for a bailout from the Canadian government as they lay off nearly 10% of their workforce. SOURCES: S. Deveau & F. Tomesco, “Why Bombardier Is Struggling to Build Bigger Planes,” Bloomberg Business, February 4, 2016; A. Petroff, “Bombardier cutting 7,000 jobs,” CNN Money; February 17, 2016 (money.cnn.com/2016/02/17/news/companies/bombardier-job- cuts-canada-europe/index.html); http://www.bombardier.com/en/about-us/history.html; F. Tomesco, “Quebec eyes fresh Bombardier aid absent federal investment,” The Globe and Mail, February 10, 2016, http://www.theglobeandmail.com /report-on-business/quebec-eyes-fresh-bombardier-aid-absent- federal-investment/article28701038/ A Resource-Based Approach to Organizational analysis—Vrio Scanning and analyzing the external environment for opportunities and threats is nec- essary for the firm to be able to understand its competitive environment and its place in that environment. It is the absolute starting place for strategic analysis. However, in order for the organization to thrive, the senior leadership team must look within the
  • 77. corporation itself to identify internal strategic factors—critical strengths and weaknesses that are likely to determine whether a firm will be able to take advantage of opportuni- ties while avoiding threats. This internal scanning, often referred to as organizational analysis, is concerned with identifying, developing, and taking advantage of an organiza- tion’s resources and competencies. CORE AND DISTINCTIVE COMPETENCIES Resources are an organization’s assets and are thus the basic building blocks of the organization. They include tangible assets (such as its plant, equipment, finances, and location), human assets (the number of employees, their skills, and motivation), and intangible assets (such as its technology [patents and copyrights], culture, and reputa- tion).1 Capabilities refer to a corporation’s ability to exploit its resources. They consist of business processes and routines that manage the interaction among resources to turn inputs into outputs. For example, a company’s marketing capability can be based on the interaction among its marketing specialists, distribution channels, and salespeople. A capability is functionally based and is resident in a particular function. Thus, there are marketing capabilities, manufacturing capabilities, and human resource manage- ment capabilities. When these capabilities are constantly being changed and recon- figured to make them more adaptive to an uncertain environment, they are called dynamic capabilities.2 A competency is a cross-functional
  • 78. integration and coordination 5-1. Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies M05_WHEE2050_15_SE_C05.indd 134 9/9/16 12:50 PM 324 Strategy Implementation: Staf�ng and Directing C H A P T E R 11 Improve Your Grade! Over 10 million students improved their results using the Pearson MyLabs. Visit mymanagementlab.com for simulations, tutorials, and end-of-chapter problems. Societal Environment: General forces Natural Environment: Resources and climate Task
  • 79. Environment: Industry analysis Structure: Chain of command Culture: Beliefs, expectations, values Resources: Assets, skills, competencies, knowledge Activities needed to accomplish a plan Cost of the programs Sequence of steps needed to do the job Reason for existence What results to accomplish
  • 80. by when Plan to achieve the mission & objectives Broad guidelines for decision making RReason ffor Mission NNaturall Structure: WhWhatt l h PlPlan to hi the BroB dad id li A tActi iivitities d d h CCostt of tf thhe SeqSequenuencece
  • 81. f Internal External Programs and Tactics Budgets Procedures Performance Objectives Strategies Policies Actual results Putting Strategy into Action Strategy Implementation: Developing Long-range Plans Strategy Formulation: Monitoring
  • 82. Performance Evaluation and Control: Gathering Information Environmental Scanning: Feedback/Learning: Make corrections as needed Pearson MyLab Management® 325 11-3. Utilize an action planning framework to implement an organization’s MBO and TQM initiatives 11-1. Explain the link between strategy and staffing decisions 11-2. Discuss how leaders manage corporate culture Learning Objectives After reading this chapter, you should be able to: Workplace Discrimination and Public Image While the legal context of what constitutes workplace discrimination is constantly evolving, public perception can impact companies in vir-
  • 83. tually any industry. In 2015, the U.S. Equal Employment Opportunity Commission (EEOC) received almost 90,000 charges of workplace dis- crimination. These included discrimination complaints related to race, color, sex, age, religion, pregnancy, disability, genetic information, and national origin. One of the more contentious issues has developed around the Affordable Care Act (ACA), a movement nationwide to recognize same- sex marriages, and theŽLGBT community. Companies including Wal*Mart, BNSF Railroad, Saks Fifth Avenue, SkyWest Airlines, and Pepperdine University have cases pending against them in the federal court system. These plaintiffs argue that they are being discriminated against because of their sex. Wal*Mart extended spousal health coverage to same-sex marriages (where legal) in January 2014, however those denied prior to that point have formed a class action suit against the company for discriminating based upon the sex of the partner. As the country moved toward
  • 84. increasing recognition of same-sex marriage (37 states had statutes on the books before the June 2015 Supreme Court ruling that allowed same-sex couples to marry) more and more companies decided to include same- sex married couples in their employees benefit offerings. Today, it presents not only a business issue, but a public perception issue. Should Wal*Mart fight the retroactive assignment of benefits or should the company settle with plaintiffs? SOURCES: “If You Are Anti Are You Anti?” Bloomberg BusinessWeek, February 22–28, 2016, pp. 23–24; “State Same- Sex Marriage State Laws Map,” Governing, (http://www.governing.com/gov-data/same-sex-marriage-civil- unions-doma-laws-by -state.html) (Accessed 3/17/16); S. Heasley, “Workplace Disability Discrimination Claims At Record High,” Disability Scoop, February 17, 2016 (https://www.disabilityscoop.com/2016/02/17/workplace- claims-record-high/21926/). A01_WHEE5488_15_GE_FM.indd 24 7/13/17 4:01 PM http://www.bombardier.com/en/about-us/history.html http://www.theglobeandmail.com//report-on-business/quebec- eyes-fresh-bombardier-aid-absent-federal- investment/article28701038 http://www.theglobeandmail.com//report-on-business/quebec- eyes-fresh-bombardier-aid-absent-federal- investment/article28701038
  • 85. http://www.governing.com/gov-data/same-sex-marriage-civil- unions-doma-laws-by-state.html http://www.governing.com/gov-data/same-sex-marriage-civil- unions-doma-laws-by-state.html https://www.disabilityscoop.com/2016/02/17/workplace-claims- record-high/21926 ■■ The strategic audit worksheet is based on the time-tested strategic audit and is designed to help students organize and structure daily case prepa- ration in a brief period of time. The worksheet works exceedingly well for checking the level of daily student case preparation—especially for open class discussions of cases. (Chapter 13) ■■ An experiential exercise focusing on the material covered in each chapter helps the reader apply strategic con- cepts to an actual situation. ■■ A list of key terms and the pages on which they are discussed let the reader keep track of important concepts as they are introduced in each chapter. PREFACE 25 FIGURE 13–1 Strategic Audit Worksheet Analysi s Strategic Audit Heading (+) Factors (–) Factors Comments
  • 86. I. Current Situation A. Past Corporate Performance Indexes B. Strategic Posture: Current Mission Current Objectives Current Strategies Current Policies SWOT Analysis Begins: II. Corporate Governance A. Board of Directors B. Top Management III. External Environment (EFAS): Opportunities and Threats (SWOT) A. Natural Environment B. Societal Environment C. Task Environment (Industry Analysis) IV . Internal Environment (IFAS): Strengths and Weaknesses (SWOT) A. Corporate Structure B. Corporate Culture C. Corporate Resources
  • 87. 1. Marketing 2. Finance 3. Research and Development 4. Operations and Logistics 5. Human Resources 6. Information Technology V. Analysis of Strategic Factors (SFAS) A. Key Internal and External Strategic Factors (SWOT) B. Review of Mission and Objectives SWOT Analysis Ends. Recommendation Begins: VI. Alternatives and Recommendations A. Strategic Alternatives—pros and cons B. Recommended Strategy VII. Implementation VIII. Evaluation and Control NOTE: See the complete Strategic Audit on pages 32–39. It lists the pages in the book that discuss each of the eight headings. SOURCE: T. L. Wheelen and J. D. Hunger, “Strategic Audit Worksheet.” Copyright © 1985, 1986, 1987, 1988,
  • 88. 1989, 2005, and 2009 by T. L. Wheelen. Copyright © 1989, 2005, and 2009 by Wheelen and Hunger Associ- ates. Revised 1991, 1994, and 1997. Reprinted by permission. Additional copies available for classroom use in Part D of the Case Instructor’s Manual and on the Prentice Hall Web site (www.prenhall.com/wheelen). M13B_WHEE2050_15_SE_C13.indd 356 9/9/16 1:03 PM 162 PART 2 Scanning the Environment MyManagementLab® Go to mymanagementlab.com to complete the problems marked with this icon . End of Chapter SUMMARY Every day, about 17 truckloads of used diesel engines and other parts are dumped at a receiving facility at Caterpillar’s remanufacturing plant in Corinth, Mississippi. The filthy iron engines are then broken down by two workers, who manually hammer and drill for half a day until they have taken every bolt off the engine and put each component into its own bin. The engines are then cleaned and remade at half of the cost of a new engine and sold for a tidy profit. This system works at Caterpillar because, as a general rule, 70% of the cost to build something new is in the materials and 30% is in the labor. Remanufactur- ing simply starts the manufacturing process over again with materials that are essentially free and which already contain most of the energy costs needed to make them. The would- be discards become fodder for the next product, eliminating waste, and cutting costs.
  • 89. Caterpillar’s management was so impressed by the remanufacturing operation that they made the business a separate division in 2005. The unit earned more than US$1 billion in sales in 2005 and by 2012 employed more than 8500 workers in 16 countries. Caterpillar’s remanufacturing unit was successful not only because of its ability to wring productivity out of materials and labor, but also because it designed its prod- ucts for reuse. Before they are built new, remanufactured products must be designed for disassembly. In order to achieve this, Caterpillar asks its designers to check a “Reman” box on Caterpillar’s product development checklist. The company also needs to know where its products are being used in order to take them back—known as the art of reverse logistics. This is achieved by Caterpillar’s excellent relationship with its dealers throughout the world, as well as through financial incentives. For example, when a customer orders a crankshaft, that customer is offered a remanu- factured one for half the cost of a new one—assuming the customer turns in the old crankshaft to Caterpillar. The products also should be built for performance with little regard for changing fashion. Because diesel engines change little from year to year, a remanufactured engine is very similar to a new engine and might perform even better. Monitoring the external environment is only one part of environmental scanning.
  • 90. Strategists also need to scan a corporation’s internal environment to identify its resources, capabilities, and competencies. What are its strengths and weaknesses? At Caterpillar, management clearly noted that the environment was changing in a way to make its remanu- factured product more desirable. It took advantage of its strengths in manufacturing and distribution to offer a recycling service for its current customers and a low-cost alternative product for those who could not afford a new Caterpillar engine. It also happened to be an environmentally friendly, sustainable business model. Caterpillar’s management felt that remanufacturing thus provided them with a strategic advantage over competitors who don’t remanufacture. This is an example of a company using its capabilities in key functional areas to expand its business by moving into a new profitable position on its value chain.87 brand (p. 149) business model (p. 138) capabilities (p. 134) capital budgeting (p. 150) competency (p. 134) conglomerate structure (p. 145) a core competency (p. 135) corporate culture (p. 145) corporate reputation (p. 150) distinctive competencies (p. 135) divisional structure (p. 144) economies of scale (p. 154)
  • 91. K E Y T E R M S M05_WHEE2050_15_SE_C05.indd 162 9/9/16 1:14 PM 286 PART 4 Strategy Implementation and Control Simultaneous pressures for decentralization to be locally responsive and central- ization to be maximally efficient are causing interesting structural adjustments in most large corporations. This is what is meant by the phrase “think globally, act locally.” Companies are attempting to decentralize those operations that are culturally oriented and closest to the customers—manufacturing, marketing, and human resources. At the same time, the companies are consolidating less visible internal functions, such as research and development, finance, and information systems, where there can be significant economies of scale. End of Chapter SUMMARY Strategy implementation is where “the rubber hits the road.” Environmental scanning and strategy formulation are crucial to strategic management but are only the beginning of the process. The failure to carry a strategic plan into the day- to-day operations of the workplace is a major reason why strategic planning often fails to achieve its objectives. It is discouraging to note that in one study nearly 70% of the strategic plans were never successfully implemented.76 For a strategy to be successfully implemented, it must be made
  • 92. action-oriented. This is done through a series of programs that are funded through specific budgets and con- tain new detailed procedures. This is what Sergio Marchionne did when he implemented a turnaround strategy as the new Fiat Group CEO in 2004. He attacked the lethargic, bureaucratic system by flattening Fiat’s structure and giving younger managers a larger amount of authority and responsibility. He and other managers worked to reduce the number of auto platforms from 19 to 6 by 2012. The time from the completion of the design process to new car production was cut from 26 to 18 months. By 2008, the Fiat auto unit was again profitable. Marchionne reintroduced Fiat to the U.S. market in 2012 after a 27-year absence.77 Unfortunately, Fiat struggled to gain any traction in the U.S. market. Despite a strong marketing campaign and a number of cars designed FIGURE 10–2 Geographic Area Structure for an MNC Board of Directors President Operating Companies U.S. Operating
  • 94. A Product Group B Product Group C R&D *NOTE: Because of space limitations, product groups for only Europe and Asia are shown here. M10_WHEE2050_15_SE_C10.indd 286 9/9/16 1:15 PM CHAPTER 10 Strategy Implementation: Organizing and Structure 319 Pearson MyLab Management® Go to mymanagementlab.com to complete the problems marked with this icon . specifically for the market, by 2016 sales had stalled at 44,000 cars a year. The company has remained strongly profitable and even acquired 100% of Chrysler in 2014.78 This chapter explains how jobs and organizational units can be designed to sup- port a change in strategy. We will continue with staffing and directing issues in strategy implementation in the next chapter.
  • 95. Pearson MyLab Management® Go to mymanagementlab.com for the following assisted-graded writing questions: 10-1. How do timing tactics impact the strategy implementation efforts of a company? 10-2. What issues would you consider to be the most important for a company that is considering the use of a func- tional structure? budget (p. 301) cellular/modular organization (p. 314) first mover (p. 299) geographic-area structure (p. 317) job design (p. 316) late movers (p. 299) market location tactic (p. 299) matrix structures (p. 310) network structure (p. 312) organizational life cycle (p. 309) procedures (p. 301) product-group structure (p. 317) program (p. 298) reengineering (p. 314) Six Sigma (p. 315) stages of corporate development (p. 304) strategy implementation (p. 296) structure follows strategy (p. 303)
  • 96. synergy (p. 302) timing tactic (p. 299) virtual organization (p. 312) K E Y T E R M S D I S C U S S I O N Q U E S T I O N S 10-3. Staffing decisions are considered an important component of strategic planning and the man- agement process. Why? How is strategy imple- mentation process connected to the decisions resulting from a staffing strategy? 10-4. Why is it necessary for an organization to align its managers with the corporate strategy to ensure better organizational performance? 10-5. Is downsizing a good strategy for revamping an organization’s competitiveness when it is facing major competitive threats in the market? 10-6. Can organizations be controlled by culture? Explain. 10-7. How is an international staffing strategy different from a domestic one? S T R A T E G I C P R A C T I C E E X E R C I S E The Synergy Game Yolanda Sarason and Catherine Banbury Setup Put three to five chairs on either side of a room, facing each other, in the front of the class. Put a table in the
  • 97. middle, with a bell in the middle of the table. Procedure The instructor/moderator divides the class into teams of three to five people. Each team selects a name for itself. The instructor/moderator lists the team names on the board. The first two teams come to the front and sit in the chairs facing each other. The instruc- tor/moderator reads a list of products or services M10_WHEE5488_15_GE_C10.indd 319 6/20/17 7:55 AM A01_WHEE5488_15_GE_FM.indd 25 7/13/17 4:01 PM http://www.prenhall.com/wheelen ■■ Learning objectives begin each chapter. ■■ Timely, well-researched, and class-tested cases deal with interesting companies and industries. Many of the cases are about well-known, publicly held corpora- tions—ideal subjects for further research by students wishing to “update” the cases. Both the text and the cases have been class-tested in strategy courses and revised based on feedback from students and instructors. The first 12 chapters are organized around a strategic management model that begins each chapter and provides a structure for both content and case analysis. We emphasize those concepts that have proven to be most
  • 98. useful in understanding strategic decision making and in conducting case analysis. Our goal was to make the text as comprehensive as possible without getting bogged down in any one area. Extensive endnote references are provided for those who wish to learn more about any particular topic. All cases are about actual organizations. The firms range in size from large, established multinationals to small, entrepreneurial ventures, and cover a broad variety of issues. As an aid to case analysis, we propose the strategic audit as an analytical technique. SUPPLEMENTS At www.pearsonglobaleditions.com/Wheelen instructors can access teaching resources available with this text in a downloadable, digital format. Registra- tion is simple and gives you immediate access to new titles and editions. Please contact your Pearson sales representative for your access code. As a registered f aculty member, you can download resource files and receive immediate access and i nstructions for installing course management content on your campus server. In case you ever need assistance, our dedicated technical support team is ready to assist instructors with questions about the media supplements that accompany this text. Visit for answers to frequently asked questions. This title has the follow- ing electronic resources. Instructor’s Manuals
  • 99. Two comprehensive Instructor’s Manuals have been carefully constructed to accom- pany this book. The first one accompanies the concepts chapters; the second one accompanies the cases. Concepts Instructor’s Manual To aid in discussing the 13 strategy chapters, the Concepts Instructor’s Manual includes: ■■ Suggestions for Teaching Strategic Management: These include various teaching methods and suggested course syllabi. ■■ Chapter Notes: These include summaries of each chapter, suggested answers to discussion questions, and suggestions for using end-of-chapter cases/exercises and part-ending cases, plus additional discussion questions (with answers) and lecture modules. Case Instructor’s Manual To aid in case method teaching, the Case Instructor’s Manual includes detailed sugges- tions for its use, teaching objectives, and examples of student analyses for each of the 26 PREFACE A01_WHEE5488_15_GE_FM.indd 26 7/13/17 4:01 PM http://www.pearsonglobaleditions.com/Wheelen full-length comprehensive cases. This is the most
  • 100. comprehensive instructor’s manual available in strategic management. A standardized format is provided for each case: 1. Case Abstract 2. Case Issues and Subjects 3. Steps Covered in the Strategic Decision-Making Process 4. Case Objectives 5. Suggested Classroom Approaches 6. Discussion Questions 7. Case Author’s Teaching Note (if available) 8. Student-Written Strategic Audit (if appropriate) 9. EFAS, IFAS, and SFAS Exhibits 10. Financial Analysis—ratios and common-size income statements (if appropriate) PowerPoint Slides PowerPoint slides, provided in a comprehensive package of text outlines and figures cor- responding to the text, are designed to aid the educator and supplement in-class lectures. Test Item File The Test Item File contains over 1200 questions, including multiple-choice, true/false, and essay questions. Each question is followed by the correct answer, AACSB cat-
  • 101. egory, and difficulty rating. TestGen TestGen software is preloaded with all of the Test Item File questions. It allows instruc- tors to manually or randomly view test questions, and to add, delete, or modify test- bank questions as needed to create multiple tests. VIDEO LIBRARY Videos illustrating the most important subject topics are available in the following format: ■■ MyLab—available for instructors and students, provides round the clock instant access to videos and corresponding assessment for Pearson textbooks. Contact your local Pearson representative to request access to either format. Acknowledgments We would like to thank the many people at Pearson who helped make this edition possible. We are especially grateful to our senior sponsoring editor, Neeraj Bhalla, who managed to keep everything on an even keel. We also would like to thank Greetal Carolyn Jayanandan, Nicole Suddeth, Dan Tylman, Claudia Fernandes and everyone at Pearson who guided the book through the production and marketing processes. Special thanks to Kaitlyn Dell’Aquila at Pearson for her hard work in the trenches.
  • 102. PREFACE 27 A01_WHEE5488_15_GE_FM.indd 27 7/13/17 4:01 PM We are very thankful to Paul D. Maxwell, St. Thomas University, Miami, FL; Terry J. Schindler, University of Indianapolis; Anne Walsh, La Salle University; Angelo Ca- millo, Woodbury University; Jeannine L. Scherenberg, Rockford College; William Rei- sel, St. John’s University; Ronaldo Parente, Florida International University; Roxana Wright, Plymouth State University; J. Barry Dickinson, Holy Family University; The- odore E. Davis, Jr., PhD, SUNY College at Buffalo; Manzoor Chowdhury, Lincoln University; David Olson, California State University at Bakersfield; and Janis Dietz, University of La Verne for their constructive criticism of the 14th edition. We are especially thankful to the many students who tried out the cases we chose to include in this book. Their comments helped us find any flaws in the cases before the book went to the printer. We also offer a big thanks to the many case authors who have provided us with ex- cellent cases for the 15th edition of this book. We consider many of these case authors to be our friends. A special thanks to you!! The adage is true: The path to greatness is through others.
  • 103. Alan Hoffman would like to thank the following colleagues for their valuable in- sight, support, and feedback during the writing process: Anne Nelson, Trena Depel, Kathy Connolly, John Nicholson, Robert Frisch, Barbara Gottfried, Bonnie Kornman, Gail Goldman, Raj Sisodia, Ken Kornman, Donna Gallo, Jeff Shuman, Anna Forte, Deb Kennedy, Paula Josephs, Lisa Dinsmore, Alyssa Goldman, Susan Fleming, Jill Brown, Lucia Gumbs, Jadwiga Supryn, Cynthia Clark, Natalia Gold, Aileen Cordette, Andrea Harding, Martha Bailey, Lew Sudarsky, Ed Ottensmeyer, Tim Stearns, Christopher Forte, Roberta Francis, Abbey Nicholson, Sam Vitali, Michael Page, Chip Wiggins, Jon Horlink, Vicki Lafarge, Dorothy Feldmann, Susan Adams, Josh Senn, Gary Cordette, Merle Gordon, Thom McGillvray, Bob Cronin, Arthur Hughes, Jayne Pollack, Susan McGrath, Joe Goldman, Ed Harding, Lynne Young, Rick Vitali, Catherine Usoff, and Beverley Earle. Special thanks to Joyce Vincelette, Kathryn Wheelen, Patricia Ryan, Jim Schwartz, and Pamela Goldberg Schwartz. Lastly, to the many strategy instructors and students who have relayed to us their thoughts about teaching the strategy course: We have tried to respond to your prob- lems and concerns as best we could by providing a comprehensive yet usable text cou- pled with recent and complex cases. To you, the people who work hard in the strategy
  • 104. trenches, we acknowledge our debt. This book is yours. A. N. H. Needham Heights, Massachusetts C. E. B. Durham, North Carolina Global Edit ion Acknowledgments Pearson would like to thank Georg Hauer, Stuttgart Technology University of Applied Sciences, Humphry Hung, Tung Wah College, Krish Saha, Birmingham City University, and Sununta Siengthai, Asian Institute of Technology (A.I.T.), for their contributions to the Global Edition. We would also like to thank David Ahlstrom, Chinese University of Hong Kong, Nazih El-Jor, Universite du Saint Esprit Kaslik, Goh See Kwong, Taylor’s University Malaysia, and Tan Wei Lian, Taylor’s University. 28 PREFACE A01_WHEE5488_15_GE_FM.indd 28 7/13/17 4:01 PM About the Authors Thomas L. Wheelen, May 30, 1935 – December 24, 2011. DBA, MBA, BS Cum Laude (George Washington University, Babson College, and Boston College, respectively), College, MBA (1961); Boston College, BS cum